Silver $840

I love charts like this. It comes from a comment at the $BHS.v bullboard at Stockhouse. https://stockhouse.com/companies/bullboard?symbol=v.bhs&postid=30088900

I love the chart not because I think it is right but rather because it makes my book's Silver $60 target look reasonable and sane.

I was saying to my pal @PeterNBell  over a beer on Friday night that when I wrote the book I did not want to be that Gold $5000 guy. Nor do I want to be the silver $840 guy. Both numbers would be total disaster for the USD and, frankly, for life as we know it. We do not want the silver stackers and the preppers to be right.

Peter is a math guy. So Peter noticed that the title of my book Gold $3000 | Silver $60 implied a gold silver ratio of 50:1. To be honest, I really had not thought of that. I was looking at historical rallies rather than the actual arithmetic.

Now, Egon von Greyerz, apparently a noted precious metals analyst, is thinking that the G/S ratio is more likely to revert to its 1720-1880 range of 15:1. No, really.

Amazing as that would be for $GPLY.v and $BHS.v (not to mention folks like $VIT.V and $GPY.v or $MOZ.t and $WGO.v as it implies the dreaded $10,000 gold) I am pretty sure we have moved on from the American and French Revolutions, the Napoleonic Wars and such like. The Industrial Revolution has, well, happened. Fiat currency had been invented and widely used and abused.

These sorts of wonderfully "data-driven" dives into metals pricing are, however, useful because they indicate sentiment. Egon von Greyerz is not an idiot. He runs Matterhorn Asset Management AG in Switzerland and was buying gold in the 1990's for $300 an ounce.

Is he wrong? For my children's sake I hope so. But there is a shot that he and other gold bulls are right. Silver bulls even righter.

Their downfall, if they have one, is that they want to hold the metal. In a gold and silver rally, even one which takes gold to $10,000 and silver to $840, it is the junior explorers, developers and producers which will go parabolic as people scramble to get in on the run.

Gold $15.42 | Silver $18.18 FOMO

Silver in USD - $17 we hardly knew you

Gold flew through $1500 and silver has breached $18.

Which means gold is halfway to the $3000 I think it will reach in a sustained rally and silver is coming up on the 1/3 level to $60.

It is very easy for investors to conclude that now that the metals are running they may have missed out on the opportunity to jump into the stocks which will ultimately benefit from that rally.

I point out in my book Gold $3000 | Silver $60 that the gold and silver explorers and developers tend to lag the moves in the metal market.

Here are some of the gold and silver juniors I follow as at 10:45 Pacific

$BHS      $0.105        +0.005
$GPLY    $0.215        -0.005
$GPY      $0.345        -0.005
$WGO    $1.07          -0.02
$TIG       $0.43          -0.06
$ATC      $0.245        +0.005
$ABN     $0.15          -0.005

The fact is that it takes a while for the market to revalue junior explorers and developers even at the beginning of a gold and silver rally. Indeed, most of the really life changing profits in such a rally occur towards the end of the rally rather than the beginning.

At the moment, the excitement generated by rising gold and silver prices is confined to the long suffering junior company investors who have been holding some of these shares for years.

What makes the juniors rise is a more general perception that gold and silver are going to go up and keep going up. That, in turn, draws peoples attention first to the metals themselves, then to the gold and silver ETFs, then to the senior producers, eventually to the mid-tier producers and then, finally, to the gold and silver juniors.

However, as I point out in Gold $3000 | Silver $60  where the metals may double or triple in value, the junior shares, carefully selected, can experience 5x to 50x share price increases as the rally takes hold.

Right now junior explorers and developers are still trading near their lows.

Smart investors will take advantage of this slow start to build positions which have very low cost entry points.

Missing the very low entry points will be an error but a recoverable one if the rally takes hold as the junior explorers will likely continue to be grossly undervalued well past gold $2000 and silver $30.

Playing the Precious Metals Rally

It looks very much as if the gold and silver markets are in the starting phases of a major rally.

I have written a short - 10,000 words or so - book on how best to make serious money in such a rally.

You can get the book for Kindle or any other ebook reader or pretty much any device at https://amzn.to/2ZdF6jB

The essential premise of the book is that in a rally junior exploration and development companies will appreciate far more than mid-tier producers or senior miners. And shares in those companies will also outperform the metals themselves by a wide margin.

Historically, the sequence in a major rally is that the metals rise, then the ETFs, then senior producers, mid-tier producers and, finally, when the rally is well established, the juniors begin to shine.

Right now, most of the juniors are doing pretty much nothing. Which is completely typical at the beginning of a rally.

For the juniors to gain traction they need to gain attention. That attention arrives when there is real excitement in the gold and silver markets.

It is always tough to spot the exact moment investor attention turns to a particular sector and part of the argument in Gold $3000 | Silver $60  is that getting that exactly right may not matter much. The gold and silver juniors have been so badly beaten up that most are bargains at current prices.

I'll be posting about real bargains and how  to find them over the next few months as we wait to see if the rally I am expecting emerges.