Inflation to Send Silver Prices Soaring—Silver Outlook Going Forward
Silver prices increase when inflation rises. From a historical perspective, for every 1% increase in inflation, silver prices rise by 2%.
Despite witnessing wild fluctuations, silver prices are up over 1,000% in the last 46 year as inflation has caused prices to increase by 500%.
Since 2013, inflation expectations were falling. In early 2016, this trend changed. Now, we see inflation expectations are increasing quickly. In early 2016, 5-year forward inflation expectation was around 1.40%. Now, it’s close to 2.10%.
Zulfiqar discusses silver prices outlook for 2017; how silver prices are set to surge 32%; the US economy is not as strong as it appears; and the ratio suggesting silver prices could surge 30%.
Silver is currently trading at around $16.50, and gold at around $1,190. The ratio has averaged around 55, suggesting that silver is undervalued. If the gold:silver ratio recalibrates, silver prices will climb 32.5%, to around $21.65 per ounce.
For the gold:silver ratio to return to historical norms, either gold prices need to fall or silver prices need to climb. The latter seems more likely, because there are more than enough catalysts to keep precious metal prices higher.
Stocks are overvalued and the bull market is more than 6 years old. This wouldn’t be a big deal if stock valuations were based on revenue and earnings growth, but they aren’t. Stock prices continue to be propped up by artificially low interest rates. We know what happened the last time the Fed raised rates prematurely.
Even though silver and gold both thrive on economic and geopolitical uncertainty, only silver does well when the economy is doing well. Should the US economy improve under Trump, the demand for silver should increase thanks to its use in a number of industries.