Here are a Few Takeaways:
?EUR? Silver's Silver Lining: Silver is going to outperform its big bro in the coming years. Throughout history, the gold-to-silver ratio has traded at much lower levels. A decrease in the GSR, down to 40 or 50 over the next several years, will juice the cash-flow generation of silver producers.
Some targets to consider. In 2011, at the peak of the perceived efficacy of quantitative easing, the gold-silver ratio averaged 44. In 1980, the last year of the 1970s inflation, the ratio averaged 30. In 1968, the last year of the price-fixing London Gold Pool, the ratio averaged 18. Each of these three points represents the end of an inflationary interpretation of the monetary paradigm in place at the time.
What might a future silver price look like? The current gold price is about USD 1,700, with silver at USD 17. If we apply the 2011 ratio at 30, silver would be worth USD 56 today. The 1980 ratio (20) would send an ounce of silver to USD85.
Mining Stocks: The Party Has Begun: The cruel four-year bear market has resulted in the majority of mining companies now being on a more solid foundation. Producers are now leaner; they have reduced their indebtedness and will benefit more from rising gold prices in the future.
Potential acquirers over the next 12-24 months: Newcrest Mining, Evolution Mining, OceanaGold, Fresnillo (MAG - for the remaining 44% interest in Juanicipio), Kirkland Lake Gold, Barrick, Newmont, Alamos Gold, SSR Mining, Torex Gold, Kinross, Equinox, B2Gold.
Attractive takeover targets: Lundin Gold, Pretium Resources, K92 Mining, Victoria Gold, Great Bear Resources, Lion One Metals, Gold Standard Ventures, Silvercrest Metals, B2Gold, Wesdome, Osisko Mining, Torex Gold. Based on our research, there will also likely be consolidation in the royalty space.
?EUR? The Dawning of a Golden Decade: In this issue of the In Gold We Trust report we present our proprietary gold model, which is based on the development of the money supply and the gold coverage ratio. Even a conservative calibration results in a gold price of USD 4,800 by the end of this decade. In an inflationary environment such as that of the 1970s, a gold price around USD 8,900 is realistic by 2030.
Hendershot Investments maintains a "Buy" rating.