When Should I Sell My Silver?

People are always asking me, “When should I sell my silver?”


Well, that question is much easier to ask than it is to answer. I often tell them “Whenever the government starts acting responsibly and not only balances the budget, but also finally decides that it has grown too fat and announces it is going on a fiscal diet.”


Of course, any people want an actual dollar target, a distinct marker to write down so that they will know exactly when to get out.  I can’t give that sort of advice, but I can say that since the dollar is shrinking, that target number keeps getting bigger. This is exactly the problem with a shrinking yardstick.  It is hard to measure something today and for that measurement to have the same meaning in the future.  So, what can we use—instead of dollars—to measure when to sell our silver? Make no mistake; there will be a time to sell sometime in the future.


Robert Kiyosaki, author of Rich Dad, Poor Dad, a few years ago stated that he has a large position in silver and plans to exit when his target is met.  He says that when the cost of a median-priced single-family home in the U.S. sells for 500 ounces of silver (or 40 ounces of gold), he believes it will be time to exit the silver market.  He will most likely trade his silver for undervalued income-producing real estate rather than trading his silver for devaluing dollars.  Kiyosaki has stated that he believes silver is still very undervalued.  As a matter of fact, since the average value of single-family homes is now $228,000, it would take a silver price of $456/ounce in today’s money for 500 ounces of silver to purchase it.  This means that Kiyosaki will wait for an additional 15x rise in silver value before he trades in his holdings.


Of course, do not rely on anyone else’s target as your exit point, because by the time we get there in the next five to 20 years, that dollar figure represented in Federal Reserve notes (dollars) will not have the same purchasing power.  You just have to stop thinking in terms of dollars and start thinking in terms of value (what your silver will purchase).


Perhaps you might want to think in terms of how much oil your silver will purchase.  In 1980, the average price of a single barrel of oil was equal to a single ounce of silver or 1:1.  After the 1980s, silver prices spiked for the next 25 years.   Today, it is around three ounces of silver for one barrel of oil. In the past three years, the extremes have been from 3.3 to 8.7 ounces of silver per barrel of oil.  Even though there has been a lot of volatility in both the oil and silver markets, the average has remained around three to five ounces of silver per barrel of oil.  So perhaps the next drop to par with oil, or 1:1, it may be time to sell your silver and trade for oil. Currently that would represent an increase of three times its current value.


Another consideration is the gold/silver ratio. The gold/silver ratio has been between 12 and 17 throughout most of recorded history.  Only in my lifetime has the ratio gotten so out of balance. The high was reached in 1991 when it went up to 91 (1 ounces of gold = 91 ounces of silver). Since then, it has been trending downward.  Currently the ratio is around 53:1 (1 ounce of gold = 53 ounces of silver). It is my opinion that the ratio will come back to its traditional value of fifteen or sixteen.  Since it has been so far above its ratio it may even overshoot it and drop down somewhere below ten before it settles back to fifteen or so. Therefore a ratio of 10:1 would put silver at $170/ounce in today’s dollars. A ratio of 15:1 would set silvers current price at $113/ounce.


Another value to consider as a benchmark is the Dow Jones Industrial Average, priced in ounces of silver.  The low for the DJIA/silver ratio was 18:1 in 1980 (that is, 18 ounces of silver could have bought the DJIA).  During the 2000 stock market peak, the DJIA/silver ratio was 2,500:1 (it would have taken 2,500 ounces of silver to buy the DJIA).  Currently it is about 418:1. So, if it approached the extreme low of 18:1 again, then silver would have to be selling for $744/ounces (or 23 times higher). Maybe you should consider selling when the DJIA/silver ratio gets near 20:1.


Whether the target is set at twenty times, five times or thirty times higher than it is right now, I feel fairly confident telling anyone that the time to sell is not yet! Buy more and hang on for the ride of your life.

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Since 2001, Larry LaBorde has sold gold, silver, platinum and palladium for investment to clients in the U.S. and around the world through his firm, Silver Trading Company LLC. The firm also offers guidance about metals storage options. We love your feedback! Please email Larry with your thoughts about this article or your questions about metals or storage.

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