Silver Price Forecast: Silver and the Dow

Silver Price Forecast: Silver and the Dow

 

The Dow making new highs is likely to be very good news for silver investors, because nominal silver peaks tend to come after significant nominal peaks in the Dow. These stock market rallies are driven by the expansion of the money supply, causing a big increase in value of paper assets (including stocks) relative to real assets.

When the increase in credit or the money supply has run its course, and is unable to drive paper price higher; value then flees from paper assets to safe assets such as physical gold and silver, causing massive price increases.

The two most significant nominal peaks of the Dow were in 1929 and 1973. Silver made a significant peak in 1935, about six years after the Dow’s major peak in 1929. Again, in 1980, silver made a significant peak, about seven years after the Dow’s major peak in 1973. So, if the Dow is currently forming a major peak (like I think it is), we could possibly expect a major peak in silver, towards the end of this decade to early next decade. This means we are likely to have rising silver prices for many years to come.

In 1929, when the Dow was making its peak, silver was still in a downtrend which only bottomed in 1931. However, in 1973, silver was already in an uptrend by the time the Dow peaked:

 

Dow vs Silver 70s

The top chart is the Dow from 1966 to 1974, and the bottom one is silver during the same period. Silver was already in an uptrend when the Dow peaked. The Dow made a major nominal peak near the beginning of 1973, with silver peaking about a year after that. Furthermore, silver made a major peak in 1980, about seven years after the Dow’s 1973 peak.

Notice that silver was still trapped within a cup formation (lower than the cup’s high), out of which it only broke out after the Dow peaked.

Below is a current comparison between the Dow (top chart) and silver (bottom chart):

 

Dow vs Silver current bull market

Like in 1973, silver is already in an uptrend long before the Dow’s possible major peak. The uptrend will still be intact, even if price falls further. If the Dow does peak very soon, will we have a silver top close to a year after the Dow’s peak? Also, will we have a major peak in silver coming some years after, like the 1980 peak?

Silver is again trapped within in a cup formation, lower than the cup high. This time the cup is much broader.  Again, can we expect a breakout from the cup’s high sometime soon after the Dow tops – like it did in 1973?

I believe that given the two questions above, the near future of the Dow will be telling for future silver prices.

The Dow’s relationship with the Dow/Gold ratio is highlighting something interesting regarding this current silver bull market compared to the previous two. Below is a 100-year chart of the Dow/Gold ratio:

 

dow gold ratio with Dow nominal peaks

 

In 1929, the Dow peak came at the same time as the Dow/Gold ratio peak; therefore, the nominal peak and the real peak coincided. The 1973 nominal Dow peak came 7 years after the Dow/Gold ratio peak. We are currently almost 14 years past the Dow/Gold ratio peak, and we still have not had a nominal peak in the Dow.

What is this progression in the timing of the Dow’s nominal peak relative to the Dow/Gold ratio telling us? Is this a natural progression or is it proving how increasingly bigger efforts are applied to artificially prop up the stock markets?

Whatever the reason, it has created a setup for a massive financial panic. Value is likely to run from paper assets to silver and gold like never before. While the first part of this collapse of paper assets has been relatively controlled; the last phase is far more likely to result in chaos. This means that the Dow’s collapse could be vicious.

At the same time, after having had a relatively subdued rise since the beginning of this bull market, silver could explode higher like never before, once the bottom is in. The current decline is likely to bring attractive opportunities to increase physical silver positions.

For more of this kind of analysis on silver and gold, you are welcome to subscribe to my premium service. I have also recently completed a Long-term Silver Fractal Analysis Report .

Hubert – hubertmoolman.wordpress.com

“And it shall come to pass, that whosoever shall call on the name of the Lord shall be saved”

Silver Price Forecast : Silver Market Update

Silver Price Forecast : Silver Market Update

Here are a few patterns that might explain the current state of the silver price, as well as, provide the possible way forward.

Below is a graphic which compares the current pattern on silver (from about the beginning of 2011 to present) to a 2007 pattern:

On both charts, I have suggested how the patterns might be similar, by marking similar points, from 1 to 6 (and alternatively from a to f). Based on this comparison, it appears that the silver price is searching for that point 6 (or point f). Previously, about more than 6 weeks ago (after the middle of March), I thought that point 6 (or point f) was already in, or close to being in.

This was my assumption, based on timing: On the 2007 pattern, you can see that from point d to point f was about 10 days, and that this was the same for point f to point h on the same pattern. When applying this to the current pattern, it was expected that point h would be in about 14 weeks after point f (about middle to end March) – similar to the 14 weeks from point 2 to point 4.

This was a reasonable expectation since the market often behaves in such a manner. However, it was the wrong expectation. It appears that the market has extended that cycle (which is not unusual); however, it appears that the bullish expectation is still very much justified. We would need a turnaround very soon though, to continue the mega bullish expectation. If we do not get the turnaround very soon, then price could go even lower than $26 (unlikely).

In my latest gold update, explained why I think this week might bring the bottom for gold. My analysis for silver also suggests that we could see a bottom for silver this week (for the latest next week).

I believe that it is very likely that we will get that massive rally soon.

For more silver and gold analysis and guidance, see my Long-term Silver Fractal Report  & Long-term Gold Fractal Report    or subscribe to my Premium Service.

Warm regards,

Hubert Moolman

“And it shall come to pass, that whosoever shall call on the name of the Lord shall be saved”

Gold Price Forecast: Premium Gold Update

Gold Price Forecast: Gold Update

Here are a few patterns that might explain the current fall in the gold price, as well as, provide the possible way forward.

Below is a graphic (all charts are from fxstreet.com) which compares the current pattern on gold (about July 2011 to current) to a 2007 pattern:

On both charts, I have suggested how the patterns might be similar, by marking similar points, from 1 to 6. Based on this comparison, it appears that the gold price is searching for that point 6.

The bullish expectation is still very much justified. We would need a turnaround very soon though, to continue the mega bullish expectation. If we do not get the turnaround very soon, then price could go even lower than $1500.

The following graphic suggests that we could see a turnaround very soon. Below is the last part of the patterns presented in the above graphic (note that the current chart is weekly chart, while the 2007 is daily):

gold forecast 2012

On both charts, I have suggested how the patterns might be similar, by marking similar point, from 1 to 3. Based on this comparison, it appears that the gold price is searching for that point 3. The market, however, appears to have played a trick, which provides the possibility of an alternative comparison. The alternative comparison is indicated by point A to G on both charts. Notice that from point C to G, the chart appears to be rising on the 2007 chart, while falling on the current chart. This explains the reason for prices going lower than I expected.

Both alternatives suggest that the gold price is searching for that final point before starting a rally. However, what this comparison also suggests, is that from a timing point of view, point 3 or point G could be in soon (as soon as this week). On the 2007 pattern, from point 1 to point 2 was about 8 days, whereas from point B to G was about 9 days. If we apply the same ratio to the current pattern, then point G could be in on day 50.62. Today is day 50 since point B, so we are there or almost there.

If we do not get the turnaround rally soon, it could mean that we will go much lower than current levels. For now, I believe that it is more likely that we will get the rally soon.

For more silver and gold analysis and guidance, see my Long-term Silver Fractal Report  & Long-term Gold Fractal Report    or subscribe to my Premium Service.

Warm regards,

Hubert Moolman

For more silver and gold analysis and guidance, see my Long-term Silver Fractal Report  & Long-term Gold Fractal Report    or subscribe to my Premium Service.

Gold and Dow Forecast 2012 Video: Impetus for Mania Phase in Gold

Gold Price Forecast 2012 – Video

For more detailed analysis of gold, silver and the Dow, you are welcome to subscribe to my free newsletter (on sidebar) or premium service. Also consider my fractal analysis report on gold, silver and gold mining.

Warm regards and God bless,

Hubert

http://hubertmoolman.wordpress.com/ (gold & silver newsletter)

hubert@hgmandassociates.co.za

“And it shall come to pass, that whosoever shall call on the name of the Lord shall be saved.”

Jim’s Formula – published with the permission of Jim Sinclair

Jim’s Formula:
September 1, 2006

1. First interest rates rise affecting the drivers of the US economy, housing, but before that auto production goes from bull to a bear markets.

2. This impacts many other industries and the jobs report. An economy is either rising at a rising rate or business activity is falling at an increasing rate. That is economic law 101. There is no such thing in any market as a Plateau of Prosperity or Cinderella – Goldilocks situations.

3. We have witnessed the Dow rise on economic news indicating deceleration of activity. This continues until major corporations announced poor earnings, making the Dow fall faster than it rose, moving it deeply into the red.

4. The formula economically is inherent in #2 which is lower economic activity equals lower profits.

5. Lower profits leads to lower Federal Tax revenues.

6. Lower Federal tax revenues in the face of increased Federal spending causes geometric, not arithmetic, rises in the US Federal Budget deficit. This is also true for cities & States as it is for the Federal government.

7. The increased US Federal Budget deficit in the face of a US Trade Deficit increases the US Current Account Deficit.

8. The US Current Account Balance is the speedometer of the money exiting the US into world markets (deficit).

9. It is this deficit that must be met by incoming investment in the US in any form. It could be anything from businesses, equities to Treasury instruments. We are already seeing a fall off in the situation of developing nations carrying the spending habits of industrial nations; a contradiction in terms.

10. If the investment by non US entities fails to meet the exiting dollars by all means, then the US must turn within to finance the shortfall.

11. Assuming the US turns inside to finance all maturities, interest rates will rise with the long term rates moving fastest regardless of prevailing business conditions.

12. This will further contract business activity and start a downward spiral of unparalleled dimension because the size of US debt already issued is of unparalleled dimension.

Therefore as you get to #12 you are automatically right back at #1. This is an economic downward spiral.

I heard all this “slow business” as negative to gold talk in the 70s. It was totally wrong then. It will be exactly the same now.