Why The Gold Price Is Trendless - August 25
The answer lies is in opposing forces at work in the markets and economy. There are two very important drivers which we discuss in this article: real interest rates and the inflation/deflation tug of war.
Just like gold, our stash of silver will help us maintain our standard of living—but may be even more practical to use for small purchases. And in a high-inflation/decaying-dollar scenario, the silver price is likely to exceed consumer price inflation, giving us further purchasing power protection. The bottom line is that the current silver price should be seen as a long-term buying opportunity. This may or may not be our last chance to buy at these levels for this cycle, but if you like bargains, silver’s neon “Sale!” sign is flashing like a disco ball.
Your opportunity is to own silver today, for less than the cost an actual mining company can even produce it for. This is investment is not an IF question, but a When question…. When silver rises…When the price explodes…When the shorts get squeezed out…
Silver prices have increased but in a disorderly manner. Over 40 years of silver prices can be represented by four zones of megaphone shaped price patterns. My round number target is $100 or more in 2016 – 2019. Although I hope that the powers-that-be will not choose to create hyperinflation in the US, if hyperinflation does occur, the $100 target will be easily bypassed and much higher prices will be “in play.”
In this interview with Sean Rakhimov, the current market action is being discussed. Rakhimov believes that once the $26/ounce price point in silver will mark reversal of the ongoing downward trend. Once that silver price breached, silver investors should set their sights on the next resistance level—$32/ounce. And if that threshold is breached, silver will test $50/ounce and more. Furthemore, silver miners should be well positioned to ride this trend perhaps several multiples higher.
There is an extremely interesting development brewing in the silver market. Chances are high this will turn out bullish, although one should not exclude a bearish outcome. On the near term, two important indicators are flashing a potential key reversal, at least for the short and mid term. First, sentiment is at an important pivot point. Second, the long term chart seems to be accomplishing a multi year chart pattern. Let’s review both in this article.
While both the technical and the fundamental outlooks for silver have improved, it’s important to note that the pair remains within a longer-term downtrend. Indeed, if prices do head higher next week, we could see resistance emerge around the 2-month high at 20.00, which also marks the bearish trend line off the August 2013 high. As long as that resistance near 20 holds, the silver’s longer-term bias will remain to the downside.
Since 2008 the RSI of the ratio has made 7 important lows below 30 that were also matched with a decent bottom in the silver price. There was also a quickly reversed bottom in the RSI in May of 2013 but silver prices were still falling and showed no sign of a bottom until early July. The RSI of the ratio made another low under 30 on May 30, 2014 and turned higher on June 6, 2013. Silver prices look like they have also turned up. This is the 8th such low since 2008.
Markets are quite ironic at times, but the pressure continues to build. Here is an interest fact. When it comes to the price itself, there has been no change over the 12 month and 6 month time frames. Consider the fact that Silver traded at around $19 in June 2013 and it also traded around $19 in December 2013.
The bubble in silver and gold is coming – it did not occur in 2011. Expect stormy weather and higher silver and gold prices ahead. When? Ask the High-Frequency-Traders, JP Morgan, the Treasury department, or just wait for demand to overwhelm physical supply in the relatively near future.
The combination of long term chart support (if it can hold of course) in both copper and silver, extreme silver short positions by technical funds, and relaxing of extreme copper short positions, could be a healthy mix for silver going forward. It is worth to following this up closely, but for now we consider this a positive for both metals.
After three years of declining silver prices, Jeff Clark believes the bear market is coming to an end. In particular, he is looking at several data points which he explains in this article. From an historical perspective, it seems that we have had 7 bear markets over the past four decades. Four of them lasted longer and three were shorter. Four declined less than today; two were about the same; and only one was significantly deeper.
There appears to be far more downside risk in the S&P than in silver. Silver has had three bad years while the S&P has had five good years. It is time for both markets to reverse. Examine the following graph of Silver versus the Silver to S&P ratio. It tells me the ratio has returned to levels seen in 2008 and that the ratio follows the price of silver.