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Frank Holmes
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Frank Holmes is CEO and chief investment officer of U.S. Global Investors, Inc., a boutique investment advisory firm based in San Antonio that manages domestic and offshore funds specializing in the natural resources and emerging markets sectors. The company’s no-load mutual funds include the... More
My company:
U.S. Global Investors
My blog:
Frank Talk: Insights for Investors
My book:
Goldwatcher: Demystifying Gold Investing
  • Silver Bullet - Still on the Rails? 0 comments
    Nov 6, 2009 9:12 AM
    I’m often asked my view on the best way to play the current runup in gold, and typically my answer to that question includes a suggestion to look at silver.

    Silver has long been called “the poor man’s gold,” and in the safe-haven trade since the start of 2009, its price has appreciated nearly 60 percent, though there have been a lot of ups and downs along the way. Over the same period, the price of gold has risen about 25 percent to an all-time high, also with a fair bit of volatility.

    At the beginning of the year, the gold-silver price ratio was 79 to 1—it would take 79 ounces of silver to buy one ounce of gold. As of yesterday’s close of $1,090 per ounce for gold, that ratio was down to 62 to 1. This narrowing trend might be seen as a negative for silver, but that’s not necessarily the case.

    This week, I saw a technical article from Lorimer Wilson on Financial Sense University’s Web site pointing out that, over the past five years, the gold-silver ratio has ranged from 43.6 to 1 in April 2006 to 84.4 to 1 in October 2008, and that the 28-year support line is 58 to 1.

    Applying the five-year ratio range at yesterday’s closing gold price would yield a silver price range of $25 per ounce (+43 percent from yesterday’s close) to $12.91 per ounce (-26 percent). The 28-year support line suggests a silver price of $18.79 per ounce, which is 7.5 percent higher than yesterday’s close.

    All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. #09-777

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