Silver In The Dead Zone Of Disinterest

From Ryan Jordan, PhD, silver researcher:

“At the moment no one is paying attention to the silver market – it looks to me as though capitulation has finally set in.  If you are someone who has enjoyed big gains in other asset classes (like stocks), now would be a great time to diversify into a beaten down, cheap asset that, by definition, can’t be printed at will and has been money for thousands of years.”

Yes, silver is languishing in a “dead zone” of disinterest, low prices, weak sentiment, and investor exhaustion.  Silver visited this $19 – $20 zone in early 2008, July 2008, December 2009, May 2010, June 2013, December 2013, and May 2014.  From another perspective, all the price gains of the past six years have vanished.  It is not surprising that most investors have lost interest in silver.

Examine the following graph of silver prices for the past seven years.

Silver_price_7_years_2014

silver price over 7 years

But wait!  There is more to the story.

  • The TDI indicator (shown at bottom) is oversold and indicating the potential for a rally.
  • From Ryan Jordan above:  “the Silver Institute confirmed what many of us suspected last year – namely, that sales of physical silver (as opposed to ETFs or options) made a new all-time record, while supply from scrap collapsed…”
  • The gold to silver price ratio is currently about 66 – very high.  Rallies in both metals often begin from such high ratios.
  • Governments and central banks are monetizing debt, borrowing and spending, inflating the money and credit supply, and debasing their currencies against hard assets and commodities.  This will eventually result is much higher gold and silver prices.
  • Silver Eagles and Canadian Silver Maple Leafs are setting sales records.  Demand is there – prices will eventually respond.
  • Silver typically spends 70 – 90% of the time boring investors and 10 – 30% of the time exciting investors by compensating for months of inactivity.  It is likely to break out of the “dead zone” and sail higher, after years of no net progress.

I doubt another low in COMEX prices will occur (courtesy of the high-frequency traders) and my expectation is that silver prices will be higher by the end of 2014, and much higher in three years.

 

GE Christenson | The Deviant Investor

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