Two weeks ago we hinted at the flashing red warning coming from 'a 4,000 year old' financial indicator. The Gold/Silver ratio had reached extremely high levels, which at the time we explained…
This isn’t normal.
In modern history, the gold/silver ratio has only been this high three other times, all periods of extreme turmoil—the 2008 crisis, Gulf War, and World War II.
This suggests that something is seriously wrong. Or at least that people perceive something is seriously wrong.
And as we concluded at the time…
Good times never last forever, especially with governments and central banks engineering artificial prosperity by going into debt and printing money.
These tactics destroy a financial system. And the cracks are visibly expanding.
So while the gold/silver ratio isn’t any kind of smoking gun, it is an obvious symptom alongside many, many others.
Now, the ratio may certainly go even higher in the event of a major banking or financial crisis. We may see it touch 100 again.
But it is reasonable to expect that someday the gold/silver ratio will eventually fall to more ‘normal’ levels.
In other words, today you can trade 1 ounce of gold for 80 ounces of silver.
But perhaps, say, over the next two years the gold/silver ratio returns to a more historic norm of 55. (Remember, it was as low as 30 in 2011)
This means that in the future you’ll be able to trade the 80 ounces of silver you acquired today for 1.45 ounces of gold.
The final result is that, in gold terms, you earn a 45% “profit”. Essentially you end up with 45% more gold than you started with today.
So bottom line, if you’re a speculator in precious metals, now may be a good time to consider trading in some gold for silver.
And, that appears to have happened…
As Silver has soared post-Fed…
Crushing the Gold/Silver ratio back to one-month lows (withthe biggest 2-day drop since October 5th 2015)…
But do not forget – even at 79x – this is an extreme level of fear – nothing has been 'fixed' as governments escalate their repression of financial freedom.
via Zero Hedge http://ift.tt/1prHjpy Tyler Durden