$1,500 Gold is Just the Beginning
Veteran CAPS members may recall my oft-repeated expression of long-term price targets for gold and silver dating back to my earlier posts on the site:
Gold to $1,650 on its way to $2,000. Silver to $50 on its way to $100.
When I began writing full-time for the Fool in early 2008, the March correction sent the gold/silver price ratio skyrocketing, and over the next couple of moneht it becamwe clear that deep damage had been done to the cycle that could take a year or two to heal. Because of that, and because sentiment against gold ran so high that I felt a target like $100 silver could turn some potential pm investors away by appearing laughably unrealistic at the time, I opted to utilize the $50 target for my published articles. It should be clear from the above expression, that I expected silver to reach $50 by the time we hit $1,650 for gold, which implied a ratio that silver has already achieved at 33:1.
Fast forward to today, where silver has restored my initial expectations in dramatic fashion. The time has come to make my $100 price target for silver more public once again. Aside from those many explicit statements, many of you will be able to see how many of my prior statements have implied silver targets well above $50; like my $100 price target for SLW (which should come before $75 silver).
Of course, both my $2,000 target for gold and my $100 target for silver are interim targets themselves, and do not represent expectations of terminal extents of the bull market run by any means. They are simply meant as a conservative guidepost for investors in the sector to factor into their allocation strategies.
$1,500 Gold is Just the Beginning
As for silver, Fools will note that silver's breathtaking ascent already has my $50 price target firmly within its crosshairs. In fact, my call for silver to triple in price from $15, where the metal could be purchased on September 2, 2009 when this article appeared, has already been vindicated. Had I thought I could state the target seriously at the time, without suffering even greater dismissive ridicule at the hands of silver skeptics, perhaps I would also have referenced my $100 price target for silver more publicly ... which I have shared with members of the CAPS community through my blog and my stock pitches. The time has come to share my $100 silver price target with you all.
Generational trends do not reverse course overnight
Particularly during the final quarter of the 20th century, the world was confidently engaged in a process of eschewing the time-tested wisdom of incorporating a modicum of precious metal exposure into a model portfolio. Gold and silver became the laughing stocks of the financial world, and the U.S. dollar was widely perceived as the unassailable global reserve currency that would seal gold's fate as a "barbarous relic."
My oh my, how the tides have turned. Today, it is the U.S. dollar that is suffering a worldwide crisis of confidence. Leading bond fund PIMCO won't touch U.S. debt with a ten-foot pole, and S&P finally moved an inch toward reality this week when it placed the United States' credit rating on alert for a possible downgrade. Safe-haven seekers and central banks the world over are finally initiating a move into gold and silver to protect against further deterioration of the purchasing power and the credit worthiness of the major fiat currencies, but for the first several years of this bull market such adaptations to the prevailing allocation models could scarcely be observed.
We don't mean to bash the silver analyst community, and there are several whom we highly respect, but it is important for silver investors to appreciate that these price forecasts are being plugged into financial models that dictate equity valuations. These models are used by traders, bankers, analysts, and portfolio managers to derive valuations for silver stocks and create asset allocations for portfolios. To anyone questioning current silver equity valuations, we would ask: what price assumptions are you using? Of course we as allocators of capital are thankful for this phenomenon, as it allows us to buy our favourite silver stocks on the cheap, knowing full well that the herd will be following behind in due course as those backward-looking forecasts get ratcheted higher.