Silver: The Best, Worst and Likely Scenarios

Includes: AGQ, DBS, SIVR, SLV, USV
by: Kevin McElroy

The only way you can be a successful investor is to be a student of possibilities. To that end, I’ve recently received some questions about silver that I’d like to share with you. I’ll start with the most bullish question:

How high do you speculate it will go and what time era? Also, can you recommend the Best Silver Dealer to Buy/Sell Silver to?

Before I get into silver’s potential upside, I’ll answer the second question first. I recently put together a few articles on how I buy physical silver and gold.

You can read them (for free) by clicking the links below:

How to buy silver and gold Part I

How to buy silver and gold Part II

How to buy silver and gold Part III

It’s likely, and possible, for silver to eventually make new modern-era inflation adjusted highs. According to my most conservative calculations, that would mean a silver price above about $130 an ounce - or 300% higher than current prices. That’s right, when silver makes a new inflation adjusted high, it will mean a quadruple for investors who buy today at around $25.50 an ounce.

What about a non-modern era inflation adjusted high? For a pie in the sky number, the all-time high for silver was reached in 1477.

In 1477, it’s estimated that the price of silver reached the equivalent of $1,055 an ounce in 2010 dollars. That would turn every dollar invested in silver today into $39 - if a new all-time high is reached.

So that’s one possibility. As for the worst-case scenario for silver, let’s look at another reader question:

I agree with what you said that silver will go higher. I've been following silver since it was $18 and saw then that it would first go to $26 before retracing. I agree it will hit $124+. But how far will it retrace?

This reader has the right idea - because knowing what the inflation adjusted high is doesn’t really tell you where the price of silver is likely to go over the short-term.

In the short term, I wouldn't be surprised to see silver get down below $19.

I don't think it will hit the $15 level we saw earlier this year, but that would be as far as I think it could realistically go in the foreseeable future.

Of course, the real worst case scenario would be for silver to drop to inflation adjusted lows of $5.72 an ounce.

That would be a 77% loss from today’s prices. Not a pretty picture - but if you’re going to be invested in physical silver and/or companies that mine silver, you need to be aware of the downside risk. Being ignorant to downside risk is like walking a tight-rope without a safety wire.

Okay, now for how I really feel:

In the long term (which could be 10-20 years - or even longer), I expect that silver will absolutely crush the inflation adjusted high. Paper currency around the world all suffers from the same chronic, debilitating disease: it has no intrinsic value. Eventually, all currencies will go to zero. In such an event, it won’t matter how many dollars it will cost to buy an ounce of silver. You’ll simply want to hold silver.

So $130 or even $1055 silver isn’t out of the question.

But for the short term, I expect silver will stay between $19 and $30 an ounce. My short-term timeline is 3-6 months.

When silver is closer to $19 an ounce, I’ll be buying. When it’s closer to $30, I’ll be holding.

Disclosure: long gold and silver.