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In my January 30th RANT – “PEAK SILVER?” – I laid out myriad reasons why silver is perhaps the MOST UNDERVALUED MARKET ON EARTH.  Moreover, I recommended higher exposure relative to gold; due to the comically high gold/silver ratio; advice, by the way, I personally took.

For hundreds of years, the gold/silver ratio held around 16:1; often fixed via Precious Metal currency standards, and sometimes in freely-traded markets.  Said ratio was loosely based on the fact that for centuries, the ratio of metal taken from the ground was roughly 16 ounces of silver for every ounce of gold.

However, since the ENTIRE WORLD abandoned the gold standard in 1971, this ratio has mysteriously risen; no doubt, due to the incessant MANIPULATION of PAPER PM markets.  In silver’s case, its relative scarcity has obviously caused the Cartel to deem it “public enemy #1; and thus, suppressed it even more than even gold; which is probably why it is the ONLY commodity to consistently have a “Commercial” net short positions for more than 20 YEARS…


Not only have essentially ALL global silver inventories been exhausted by industry – as opposed to gold, where nearly every ounce ever mined still exists…


…but silver production is depleting dramatically faster; yielding a 2011 silver/gold output ratio of LESS THAN NINE…


Moreover, as roughly 70% of ALL silver production is by-product of other types of mines (principally lead/zinc), further downturns in global economic activity could decrease silver production – just as its MONETARY demand explodes


Anyhow, this RANT was “catalyzed” by my fascination with Cartel algorithms that appear to have ARBITRARILY chosen “54” as the current ratio of PAPER gold to PAPER silver prices.  In the PHYSICAL world, the ratio is somewhat lower, as premiums are generally higher for silver than gold; particularly when major mints RUN OUT of supply…


However, in the PAPER world, it has averaged 57 over the past 39 years; and “54” for the past two…


For these and many other reasons – mostly detailed in the “PEAK SILVER?” RANT – “ADMIRAL SPROTT” believes silver will be the best asset class of the decade.  I whole-heartedly agree, as I continue to anticipate the “ULTIMATE QUADRUPLE TOP BREAKOUT”; and with it, a decline in the gold/silver ratio to somewhere between 5:1 and 15:1.


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