First signs of a parabolic spike for silver
Posted on 26 March 2011 with 8 comments from readers
Any investor in silver must have found the past six months pretty exciting. This precious metal has more than doubled in that time. The pessimists see a high flying price heading for a fall, and they did so last autumn before this take-off.
For other chartists this increasingly looks like a repeat of the 1978-80 silver price blow-off with a super spike to $50, a price that has still yet to be achieved 31 years later.
Gold marking time
Gold has yet to make this sort of price breakout and still seems on a steady uptrend:
It is silver that has the most exciting price trend developing. Of course this carries a huge red warning for volatility. This is not a straight line movement. The ups and downs can and no doubt will be formidable. Silver crashed 52 per cent in late 2008 below $10 but then bounced back magnificently.
Silver breaks out
However, just look at the five-year chart for the shiniest of metals:
You indeed have two possible conclusions: that this is the spike almost over; or that this is the base for a parabolic upward price movement. Going sideways from this sort of chart would be highly unlikely.
What we really need to confirm an imminent price spike for silver is for gold to also breakout of its current range of $1,400-1,450. And it is increasingly clear that this is about to happen, either after a global financial market correction or very soon if nothing happens to bring markets down.
Inflation
For none of the fundamentals supporting higher precious metal prices show any sign of going away. Should the $246 billion cash injection by the Japanese Central Bank not be considered as QE3? It is certainly another vast liquidity injection, and a rise in the supply of money is always followed by inflation.
Then what of the instability in the Middle East? We hear Gaddaffi has 150 tons of gold in Tripoli to fund his civil war, and that Iran has been cashing out of dollars and into gold for many years. All over the world the rich are buying gold and silver to protect against inflation and political instability.
It is indeed rather like the late 70s with the multiple oil shocks, central banks printing money and revolution in the Middle East. Even the 2008 price crash for gold and silver looks like a repeat of the 1976 mega-correction, and if so that puts us in 1979 today just before the great spike.
ArabianMoney tipped $320 silver last September (click here).
8 Comments posted by readers:
Interesting commentary, Peter.
There are some very strong indicators pointing to a much higher silver price (in addition to those you’ve mentioned in this commentary).
First, there’s the very tight supply of the metal. The available supply is so tight that some silver miners have agreed to accept money for their future silver streams (go here for recent info: http://www.financialpost.com/news/mining/Miners+cling+their+sizzling+silver+streams/4503738/story.html ).
Second, there’s the continued excessive manipulation of the “paper” silver on the exchanges, most notably the US COMEX, by JP Morgan and HSBC.
Third, Today, France has just upped the ante, regarding military killings of civilians in the MENA region. So that area could erupt into white hot insurrection from other MENA countries. A summary of Sarkozy’s comments here: “In any democracy there can be demonstrations which can turn violent. But no democracy can accept that the army shoots live ammunition at protesters. This is the position of France and it does not change no matter what the country concerned.”
Link: http://euobserver.com/9/32064
Fourth:Then there’s the fact that many developed nations have always kept a large supply of silver as a “strategic reserve”, much like a strategic reserve for oil. The US used to have over 2 billion ounces of the stuff back in the 1960s; today, they have none!
Got physical silver? (no, that fraudulent JPM ETF, symbol SLV, won’t cut it!)
The silver is very cheap with respect to gold, the ratio of quote is 1 to 40. And in fact, it is not logical because although more Silver has been extracted of the mines approximately 10 times than Gold, 90% of the Silver has been consumed, leaving to the ratio of produced Gold existence and Silver in 1 to 1. And considering that only lack to extract in mines 20% of both minerals, by incredible that seems: THE RATIO OF TOTAL EXISTENCE IN THE PLANET (WHAT IT IS OF ALREADY PRODUCED AND TO EXTRACT OF THE MINES) OF GOLD AND SILVER IS ONLY 1 TO 3. Silver is the best investment of the decade.
Posco to raise their steel price by 15 to 20% – CNBC World.
@ Alfredo:
I believe the ratio that you cited is in error; while I’m very, very bullish on silver, there is no way that the ratio can be 1 to 3.
Perhaps the foremost authority on silver is Ted Butler; there’s tons of valuable info on his website; for example, here’s a 5 year old commentary he made on how precious silver truly is: go here:
http://news.silverseek.com/TedButler/1160149628.php
Another good source for silver mining info is the Silver Institute; they publish very interesting monthly reports on silver, and this month’s issue is devoted to the growing demand for industrial applications. Go here:
http://www.silverinstitute.org/pr28mar2011.php
Obewon. There is NO error, I talk about to the ratio between all the gold and all the silver that is in the planet. The silver has been consumed in near 90% and is only a fifth part to extract of the mines. Ratio 1 to 3 is very approximated. Thanks a lot for the pages of Ted Cutler and the Institute of the Silver, but already I have consulted them several times before.
Ted Butler is one of my favorite authors. I recommend the book to him of Michael Maloney, guide to invest in gold and silver. And I confirm that the ratio Gold and Silver from 1 to 3 is very approximated and is no error. Please it investigates carefully whichever gold and Silver is in the surface and in mines, it will discover that the ratio is 1 to 3. Much luck for you.
OK.
I misunderstood the words in your first set of remarks.
19 April Update:
Jim Rogers talks about triple-digit silver, and issues a warning about “parabolic” moves. Go here for interesting read:
http://www.zerohedge.com/article/jim-rogers-comments-triple-digit-silver-and-issues-warning-parabolic-moves-always-collapse