Questions About the Future as Silver is Poised to Hit $16 An Ounce

Unlike many investments, silver has actually done better in May than any other month for the past 22 years.  This leaves many people the impression that it's highly overbought at this point.  Others have just jumped into the game and are getting their hands on some fairly high priced white metal.  Whichever group you belong to, the biggest question you're likely asking yourself is, "Will silver continue its climb upward or get pared off on some profit taking?"

The Gold to ratio, or "GSR" is hovering around 62 right now.  In March of 2008, when silver hit $20 an ounce, the GSR was around 47.  Later on that year it hit a high of 97.  So since the GSR has gained back about 50% from its 2008 record, silver is starting to recover and it is becoming more and more apparent that the recent gains in silver have likely burned up just about all of the rally fuel that silver has.

If I were to predict a timeframe where silver will slump back into the low teens or even to ten or eleven dollars an ounce, I'd say that August or September could very well be that time.  I know that there are some major reorganization efforts taking place in the US as far as GM and Chrysler go, and with bank failures still looming on the horizon, precious metals should be primed for record-breaking gains.  But I just don't see very much support for silver above $16.  It may very well jump higher and even touch the high teens for a short time, but industrial and jewelry demand are still at all time lows, and don't show many signs of recovering in the next year or so.  So as has been the case in many years past, I predict that silver, as well as gold will hit their yearly lows in late summer.

For those of you who are already in a silver or gold heavy position it may sound pessimistic to say that commodities like silver and gold will take 20 or 30 percent hits in the coming months, but rest assured anyone willing to save some cash for a few months will be able to cash in on the drop in price.  Look at the price drop as a great way to dollar average your silver or gold stack.  And for those of you who are thinking about getting into the market and have not yet, wait a couple of months until gold and silver cool down a bit and then jump in.  Start stacking your savings and wait for silver to drop below $13 an ounce and gold to below $800 an ounce.  I'm confident we'll see just that, but it'll take a little bit of perseverance and will power not to pull the trigger too early.

Once industrial demand heats back up, look for silver to hit new highs.  I predict that silver will be trading above $20 an ounce next year at this time and gold will have breached the $1300 an ounce mark and working its way higher.