Silver to $500? The Precious Metals Trade That Could Explode Next

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**Michael Oliver** (1:30)
I have a rational one that says silver ought to be $300 to $500. The miners are probably the most profitable sector in the US stock market. That is a long-term table pounding signal that the monetary metals complex is about to go ape.
We measure the relative performance of silver versus gold by dividing an ounce of silver into an ounce of gold and expressing the answer as a percent. If you go back and look at that 50-year range on price, two peaks of 50 bucks, 1980 and 2011, silver. But its relative performance to gold back in 1980 was 6.5 percent. Remember that. Then in 2011, when it went up to 50 again, it was 3.1 percent of the price of gold.
Right now, we're like 1.6 percent of the price of gold. What if the spread relationship between silver and gold also goes up and takes out the highs of the last 50 years? Price did, why not relative performance? Maybe silver goes to 10 percent of the price of gold, but it doesn't close out that 1980 high. Don't be shocked, because its relative value to gold is off the page. Same is true with gold and silver miners, even more so. They are so underpriced to that which they get out of the ground, that it's almost laughable. You almost look at the miners relative to gold on a spread chart, going back to 1980s with XAU index.
It used to be, on average, 25% of the price of gold. XAU divided into an ounce of gold was 25%. It was up to 35 at one point and down to 18% at another, but it lived in this range, average 25%. It went to 4% in 2015 I mean, why not go to free?
And it lived in a 13-year wide range that is capped off at about 8.5%, still well, well below the reality that existed in 1980s, 1990s, 2000, 2008, et cetera. Same is true with GDX versus gold, more popular mining, also has 20% silver miners in it. It's trading right now at 2.07% divided into gold. If you look at its spread relationship on a chart, its valuation is plotted each month, divided into ounces of gold. There was the collapse that occurred in 2008 through 15, where it went to unbelievably low levels and lived there for 13 years, really, because it entered that range in 2013, 14 But anyway, you had three run-ups to 2.2% area divided GDX into gold. February, we got up there again, 2.2.
We had a sharp drop recently because of the drop in the metals themselves. The miners pulled back some. Now, they're back up to 2.07% today, last calculation I read. They're moving back toward that what is three highs in a perfect rectangle. That if you're a technician and you looked at that chart, you'd say, golly, I got to buy that guy when he breaks out.

**Adam Taggart** (4:56)
So, if you mentioned 25% before, is there any forecast in your mind where that 2% rises back up to that miners get back up to that level?