In Ted Butler's Archive


If you could identify the most undervalued investment asset in the world that would be another way of saying you had identified the world’s best investment opportunity. That’s the case with silver because it is the cheapest investment asset to own and it is likely destined to be the best investment opportunity over time.

Forget the fact that silver is at or below its primary cost of mine production or how scarce and rare it is or how much it has dropped from three years ago. The way to determine what the world’s most undervalued asset might be is by comparing it to all other assets. Start by dividing silver’s price into gold’s price. The higher the ratio, the more undervalued is silver. At 66 to 1, silver is a bargain compared to gold.

Due to silver’s steep price drop over the past three years, it is now cheaper relative to every other asset in the world. That includes its sister precious metals like platinum and palladium and assets that don’t usually come to mind like copper, oil, the stock market, bonds and the dollar. Right now silver has never been more favorably priced compared to all other investments. Quite simply, undervaluation is the hallmark of a great investment.
Everything is always relative and on a relative basis, silver is the cheapest asset of all. And to my mind that makes it the asset offering the highest prospective gains for the future. If there were some obvious and compelling legitimate explanation for why silver should be undervalued relative to everything else, perhaps the undervaluation would be justified. But there is no such justification.

As I have reported for years, COMEX silver has the largest concentrated short position of any commodity. Eight traders, led by JPMorgan, are responsible for silver being the most undervalued asset in the world. The world’s largest concentrated short position should logically result in the world’s most undervalued asset. While this can extend silver’s undervaluation, it cannot last forever. Additional paper short sales by JPM will blow up in their faces or the COMEX will shut down. That’s because selling additional paper contracts short will not satisfy demand for physical silver.

Silver reminds me of the time it traded under $5 per ounce. The thought that it might eventually climb more than ten times in value was widely disbelieved and scoffed at. That’s because silver was the most undervalued asset in the world, as it is now. If you didn’t catch the first run, you’ve just been given a second chance.

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