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.
A Massive Spike In The Price of Silver Is Imminent
Gold and silver are very close to entering the mania phase of this bull market. In order for gold and silver to go into the mania phase, value has to be diverted from somewhere, and that “somewhere” is most likely stocks. Since 2000, there has been a correction in stock values, in real terms; however, nominally, stocks are still significantly high (close to its all-time highs).
I expect that significant value will soon be diverted from the general stock market, to silver and gold, causing prices to rally significantly, until these metals also become overvalued.
This is exactly what happened in 2007/2008. Below is a graphic (charts from barchart.com) that illustrates how this happened in 2007/2008:
The top chart is for the S&P 500 and the bottom is for silver. I have drawn a yellow line, at the point where the S&P 500 peaked. It is only after the peak in the S&P 500 that silver broke out, and eventually rallied significantly (while the S&P 500 was crashing). From a “fractal” point of view, we are currently in a similar position, with stocks getting ready to peak.
Silver Fractal Analysis
Silver has made its way out of the giant flag; however, it fell back again, lower than the upper boundary of the flag, as shown in the following chart:
Previously, I have stated that price will eventually break out of the flag and go on to make much higher highs. Below, is some evidence to support this view:
The top chart is for gold and the bottom one is for silver. Gold and silver made similar patterns before and after reaching their respective 1980 highs. From the charts, you can see there is a similarity in how gold and silver approached their 1980 high. Both made a triangle-type pattern (green lines) just before it reached the 1980 all-time high. When it came out of that triangle pattern, it rallied strongly to the 1980 high, which started the formation of a flag-type pattern (yellow lines).
Gold passed its 1980 all-time high during 2008, while silver is yet to do so. By looking at the pattern of how gold passed its 1980 high, we can predict how silver might do it as well. If silver continues to follow the pattern that gold formed, then we can expect a massive spike towards the $50 and beyond, very soon. Read my previous article for more about this comparison.
Silver has made its way out of the giant flag; however, it fell back again, lower than the upper boundary of the flag, as shown in the following chart:
Previously, I have stated that price will eventually break out of the flag and go on to make much higher highs. This is still my expectation, and here, I would like to present some more evidence for this view.
Where is silver going now?
Based on previous work on silver, gold, gold stocks and the Dow, I see a lot of similarities between now and the late 60s to early 70s (to 1973). Below, is an interesting comparison between the silver charts of then and now … : to continue, subscribe to my premium service
Silver relative to the Dow
It is important to understand the conditions that exist today in financial markets. I have explained these conditions in previous writings. We are currently facing conditions that are similar to that which existed during the Great Depression, but also during the 70s. Of particular importance, is the fact that we are at a point where the stock market is significantly overvalued as compared to real assets such as gold and silver.
Since 2001, there has been a correction in stock values, in real terms; however nominally, stocks are still significantly high (close to its all-time highs). I believe that this correction will continue; however, I expect the nominal values of stocks to decrease significantly over the next couple of years, while the nominal values of assets like gold and silver increase significantly.
In order for gold and silver to go into the mania phase… to continue, subscribe to my premium service
Silver Forecast: Long-term Silver Chart Analysis Indicates Why Silver Is Likely To Pass $150
I would like to point out some interesting signals on the long-term chart for silver.
Below, is a long term chart for silver:
analysis long term silver chart
On the chart, I have highlighted two fractals (or patterns), marked 1 to 4, which appear similar. What makes these two fractals so special is the similarity of the circumstances in which they exist.
There was a significant peak in the Dow (1973 and 2007) between point 1 and 2 of both fractals. Both peaks in the Dow came about 7 years after the peak in the Dow/Gold ratio. After point 2, on both fractals, the oil price made a significant peak (1974 and 2008), about 8 years after the peak in the Dow/Gold ratio.
Thanks to this similarity in events, as well as the similarity in sequence, I was able to identify the great possibility for significantly higher silver prices, back in October of 2010. This was a very clear signal that higher silver prices were coming, and that is exactly what we got, when silver moved to $49. However, this run is not over yet. The move from $17, when silver broke out of the triangle (at point 3 of the second fractal) to $49 was just the first part of the move. In my opinion, the biggest and best part of this move is still ahead. In various previous articles on silver, I have presented a lot of evidence to support my opinion for higher silver prices over the coming years.
Based on the fractals on the chart, we could still have about two years before we could get a top like we had in 1980. That is 14 years after the Dow/Gold ratio top (beginning of 1966 to the beginning of1980 vs the end of 1999 to the end 2013).
From a price point of view, there is also an indication that this move is not over yet. If the two patterns indicated continue their similarity, it would be reasonable to expect the final top of the current pattern to higher than $150. Why? If you measure the price movement from point 1 to point 2, in the first pattern, and compare it to the price movement from point 4 to 5, in the first pattern, you will find that the movement from point 4 to 5 is at least 7.6 times larger.
Currently, the movement from 4 to the $49 in April of 2011 is only about 1.65 times larger than the movement from point 1 to 2. If it follows the first pattern, and grows at least 7.6 times greater, it will comfortably pass $150.
Silver is currently trading at key resistance levels. See below, a six-year silver chart (all charts generated at fxstreet.com):
On the chart, I have drawn a significant upward sloping resistance line (red line). Silver has now reached that line, trying to breach it and stay above it. It has also reached the top resistance line of a big flag pattern. If the silver price gets through these resistance lines, and stays above them, then it is likely to continue its rise, but likely in a more accelerated manner.
These resistance areas can be very tricky. Price can often react in a violent manner downwards; however, there are no certainties.
What silver will do at these resistance areas is a short-term problem. From a longer point of view, it is clear to me that silver is going much higher. Eventually, it will successfully break out of the big flag and spike upwards past the $50 level.
In a previous article, I have shown how closely silver is following a past pattern on the gold chart. That comparison also suggests that the silver price will eventually successfully breach the resistance lines indicated above. Below, is the chart from that comparison:
On the charts (silver is the top one and gold is the bottom one, I have marked the two patterns (1 to 5) that are similar on the gold and silver chart. For more details and explanation of the two patterns, please read that full article. If the silver pattern continues to follow the gold pattern, then the silver price would pass the resistance lines indicated in the first chart, and eventually challenge the $50 level.
The debt-based monetary system creates an illusion of wealth. It allows for claims on real goods to significantly exceed the actual amount of real goods. You then have a number of people believing they have wealth, since they have claims (pieces of paper or tokens) showing that they have these real assets, whereas, in reality, if everyone was to claim the real goods, there would not be enough to go around.
The high debt levels, in some way, represent the extent to which there are more claims than the actual underlying real assets.
During the period of credit extension – that has been for at least 80 years – most businesses are set up to take advantage of this system. The system allows for an easier way to increase wealth (illusionary), since only claims on real assets need to be increased, instead of the actual real assets.
As you come to the end of the credit extension cycle, most businesses are dependent on this credit extension, either directly or indirectly. When the debts become too heavy to bear (no one knows the day or the hour, but there are signs), the debt bubble will burst, and over time eliminate all those business opportunities brought about by the debt-based system, as well as the businesses dependent on it.
When this process reverses, there is little opportunity to trade the claim on an asset instead of the actual asset, and also few opportunities to increase the amount of real assets. Furthermore, instead of measuring wealth in terms of claims on real assets (as is now the case), people are more likely to measure wealth in terms of real assets, especially gold.
Today, after a consistent period of credit extension, we have exactly the situation where most businesses are dependent on the debt-based monetary system. I believe we are moving past the point, where any benefit can be achieved from credit extension; therefore, we have the ideal set up for a massive collapse in the world economy.
The increase in the gold price, in real terms, is the clearest signal that it is becoming more and more difficult to increase real wealth (wealth in gold ounces). It will become even more difficult as the economic decline sets in; eliminating businesses very dependent on the debt-based monetary system. Financial institutions like banks would be at the top of this list, but will not be the only ones.
The shift from measuring wealth in terms of paper claims (dollars) to gold ounces, and the limited means to increase gold ounces, will change the business and investment world significantly, and will create a massive rush into those opportunities that increase gold ounces. The shift is already evident, with some countries possibly trading oil for gold.
Currently, in my opinion, silver bullion and gold miners present some of the best opportunities to increase the amount of real wealth as measured in gold ounces.
Both, silver bullion and gold miners are still trading lower or at its 1980 high, and also at relatively historic lows against gold. Silver offers the best opportunity, at the moment, since it offers less risk than shares in gold miners. However, as the gold/silver ratio falls (which is expected), gold miners will become more and more attractive.
Silver Chart Update:
Below, is a 6 year silver chart:
Silver is making its intention to pass the $50 level clear. It is continuing in a pattern similar to gold did, before it cleared its 1980 high (see here). The next important obstacle is to get out of the flag (at about $35 currently). If it continues the pattern that gold made, then it will blast past $50.
Silver Price Analysis: Silver Likely To Make Explosive Move
The price of a good often behaves in a similar manner at or around the same kind of milestone. An example of such a milestone could be a significant top. Price often forms a similar type of pattern at different significant tops – different in terms of time of occurrence. This is a reflection of how market participants themselves often behave in a similar manner when faced with the same kind of situation. This of course makes perfect sense, since it is normal, for example, to rest after you have been extremely busy for a while. For most people, this is true whether it was yesterday, or in 20 years.
In the current silver market, there are some similarities as compared with the 1970s. There are also things that are much different today, in the economic landscape, compared with that of the 1970s. One of the significant things that is different now is the fact that debt levels, relative to GDP, are extremely high compared with the seventies.
In my opinion, this is one of the main reasons why we are likely to have a massive Depression this time around.
Here, I would like to illustrate how the silver price behaves in a similar manner, today, compared with the 1970s. Below is a graphic that compares the silver price chart of January 1978—August 1979 to the period from January 2009—present (charts generated at barchart.com):
I chose these timeframes because price broke out of the significant high (for the relevant decade) around these periods. I have drawn a blue line at the level of the relevant significant high.
Note how the run-up to the blue line is visually similar in both cases. After going through the blue line, price rallied significantly until it peaked at point b (in both cases). It then corrected/consolidated forming a flag/pennant type formation.
Note that in the 70s and in the current chart, price corrected to just above the blue line. It does not mean it cannot still move to the blue line, since, to stay valid, it just needs to stay at or above the blue line. Note that, currently, I do not see any evidence that we will still go lower than the $26 level.
The comparison suggests that we should now rally towards point d and eventually go higher than point b ($50).
The flag pattern formed currently is significantly bigger (in price movement) relative to that of the 1970s. This is possibly indicating that this fractal pattern is growing significantly, which could mean, going forward, bigger price increases relative to the price increases of the 1970s.
The move from point a to point b, on the bottom chart, was remarkable. It took silver from about $17.50 to about $50, a 185% increase. Compare that to the 1970s move of 33.33% (from about $6 to $8). To me, this signals that silver has changed gears (big-time) relative to the 1970s.
The above comparison is also supported by a comparison I did for gold and silver, in a previous article.
Find me also at: picturegoldandsilver – gold and silver analysis contained in one image/picture
Below is a graphic that compares the silver chart (from 2007 to today), to the gold chart (from 2008 to 2010) (all charts generated at fxstreet.com):
The top chart is for gold and the bottom is for silver. I have highlighted how similar patterns exist on both charts. On both charts are ascending triangles, out of which price broke out to the upside. After the breakout, price increased significantly from where both formed a consolidation pattern.
The ascending triangle for silver (roughly 30 months) is much bigger than that of gold (roughly 19 months). The consolidation patterns for both charts took roughly the same amount of time to form, relative to their ascending triangles (about half the time of the triangles).
Based on this comparison, it would seem that silver was at point 0 on 29 December 2011, and it is now busy making its way toward the blue line and will eventually pass the $50 level, just like the comparison to the 70s chart suggest.
Also, if you compare the price movement for silver after it broke out of the triangle to that of gold’s movement, you will notice that there is a huge difference. Gold moved from about $1000 to $1227 (a 22.7% increase), whereas silver moved from about $21 to about $50 (a 138% increase). This, to me, says that there is a massive amount of energy underlying the silver market, and when it is ready to unleash, we will see price/value increases that will stun even the most ardent silverbugs.
The kind of movement we’ve seen since silver has moved out of the triangle is normally associated with moves at the end of a big move. So, either that move was the end of silver’s big move, or it was just an unusually big beginning of a really big move, which suggests we will have an unusually big end of a big move (still to come). Again, I see no evidence to suggest that anything we’ve seen so far was the end of the silver bull market, so I am expecting the latter (i.e. a very powerful upleg yet to unfold).
The real power of this expected move is likely to be released only some time after price has surpassed the $50 level.
Below, is a video that illustrates the principle discussed here:
For more of this kind of analysis on silver and gold, you are welcome to subscribe to my free newsletter or premium service. I have also recently completed a fractal analysis report for gold and silver – more detail on my website.
Warm regards and God bless,
Hubert
Find me also at: picturegoldandsilver – gold and silver analysis contained in one image/picture
Silver and gold are in the process of bottoming, and should rally very soon. The depth of the recent decline may be surprising; however, it does not signal the end of the bull market. The fundamentals for silver and gold are very strong, and they have not changed over the last couple of days
We are still using fiat money and debt levels are still extremely high. The massive debts brought about by the debt-based monetary system, will not just go away. A few things have to happen before debt is brought to acceptable levels.
The debts have to be paid or defaulted on. Either way, that means significantly reduced economic activity (Depression) world-wide. That likely also means another big stock market crash. Before this happens it would be foolish to talk about a top in precious metals, since these conditions (a deflating debt bubble) are what will drive gold and silver prices significantly higher.
In a few of my previous articles, I have shown how one can use gold as a leading indicator, to predict what may happen to the silver price. I stated the following:
“So, there is not just a similarity in how gold and silver trade at the same time period, but also how they trade at similar milestones, despite the fact that those milestones are sometimes reached at different times. This can cause silver or gold to be the leading indicator, depending on the particular milestone”.
I would like to continue with that theme, and use gold’s past patterns to suggest how the silver price will perform over the next couple of months.
Below is a graphic that compares the silver chart (from 2007 to today), to the gold chart (from 2008 to 2010) (all charts generated at fxstreet.com):
The top chart is for silver and the bottom is for gold. I have highlighted how similar patterns exist on both charts. On both charts are ascending triangles, marked 1 to 3, out of which the price broke out to the upside. After the break-out, price increased significantly, from where both formed a consolidation pattern.
Find me also at: picturegoldandsilver – gold and silver analysis contained in one image/picture
The ascending triangle for silver (roughly 30 months) is much bigger than that of gold (roughly 19 months). The consolidation patterns for both charts took roughly the same amount of time to form, relative to their ascending tri-angles (about half of the time of the tri-angles).
So, from these two charts, it seems that silver is still following gold’s lead – but, are those consolidating patterns similar? It might not be clear that they are similar, but let’s take a closer look.
Below, I compare the two consolidating patterns, to see if there are any similarities:
Again, the top chart is for silver and the bottom for gold. I have highlighted significant points (1 to 12) on both charts to suggest how the patterns may be similar. The first significant similarity to point out, is the fact that the first part of both patterns formed a cup (points 1 to 5), which are similar to cups formed, right at the beginning of both their respective triangles. (See the previous chart – the cups start at point 1 and finishes halfway to point 2).
The fact that the first parts of both patterns are similar to cups within their respective triangles, lends more justification for comparing these patterns. One of the reasons why it might not be so apparent that these two patterns are similar, is the fact that the angle at which the patterns appear, are different overall, as well as for some individual patterns, within the pattern. For example, for gold the cup (1 to 5) slants upward, from left to right, whereas for silver it slants downwards.
Now, if you look at both chart in detail, and compare the points I have highlighted, you will see that they are quite similar. If these two patterns are indeed similar, then silver is searching for that point 12, which could already be in today, or could be in (lower) over the next couple of days.
If the similarity between the two patterns continues, then we could have a massive rally soon. This is therefore consistent with my previous analysis which calls for a much higher silver price over the next couple of months.
For more of this kind of analysis on silver and gold, you are welcome to subscribe to my free newsletter or premium service. I have also recently completed a fractal analysis report for gold and silver.
Warm regards and God bless,
Hubert
(gold and silver newsletter)
Find me also at: picturegoldandsilver – gold and silver analysis contained in one image/picture
Silver Price Forecast: Silver During A Monetary Collapse
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Silver Price Forecast: Silver During A Monetary Collapse
Please subscribe to my premium or free service (subscribe on the side bar by entering email address) for regular updates. For more detailed silver analysis you can purchase my Silver Fractal Analysis Report.
Silver Price Forecast Video: Comparing the Dow’s bull market of the 80s and 90s to the current silver bull market. Similarities predict that silver prices should rise significantly over the coming years:
