Investing in Silver in 2011

Forecasting prices for anything can be tricky. And a precious-metal commodity such as silver is no exception.

With gold holding the leash on its "lapdog" - silver - the performance of the so-called "yellow metal" holds the key to silver prices in the New Year.

Here's why: For several years leading up to the 2008 stock-market panic, it typically took 55 ounces of silver to buy an ounce of gold. Today, a gold ounce will cost you 50 ounces of silver.

The message: There's been a fundamental shift, where precious metals investors see silver as the "more-affordable" true-money option. So, I expect this newer 50:1 ratio to hold, and perhaps to even decline - which portends a relative outperformance for silver versus gold.

And that brings me back to my price prediction. If we use the current 50:1 ratio - and my expectation that gold will be trading at $1,900 an ounce by the end of 2011 - I believe we're looking at a target price for silver of $38 an ounce. (more)