Silver: 50 Days and 100 Years


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Gary Christenson - Deviant Investor

Maintain perspective! Skip the hope and hype, the “analysis” from vested interests, and look at facts:

  • Silver closed on February 13, 2014 at $21.42.
  • 50 days earlier, on December 26, 2013, it closed at $19.88
  • That is about 7.7% price increase in 50 calendar days and about 11% above the December low. The silver bulls are celebrating. The silver bears are probably trying to convince themselves that a huge correction is imminent and perhaps silver will plunge to new lows.
  • I personally heard Bo Polny announce on February 8 that gold and silver would have a good week. He was correct! Apparently he knew something that most of us did not.
  • For some historical perspective, silver closed on April 9, 2013 at $27.88.
  • 50 days later on May 29, 2013 it closed at $22.45, a loss of nearly 20%.
  • Prices rise, prices fall. The same is true for housing, the Nasdaq, and Manhattan real estate.

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So What? Look at history and facts and ignore the hype.

According to kitco.com, the average annual prices for gold and silver were:

Year Gold Silver
1913 $20.64 $0.58
1971 $40.80 $1.39
2013 $1,411.00 $23.79

Prices have dramatically increased for 100 years since 1913, the birth of the Federal Reserve – our inflation machine. Worse, since Nixon abandoned the partial gold backing for the dollar in 1971, the inflation machine has accelerated. Using Kitco’s average annual price data:

Since 1913 gold has increased 4.32% per year, compounded annually. Silver has increased 3.78% compounded annually.

Since 1971 gold has increased 8.80% per year, compounded annually. Silver has increased 7.00% compounded annually.

Since 2001 gold has increased 14.74% per year, compounded annually. Silver has increased 15.17% compounded annually.

In the big picture, gold and silver are increasing in price, along with the prices for crude oil, an average house, gasoline, food, and almost everything we need. Both gold and silver have accelerated their average price increases since 2001, the end of their 20 year bear market.

Official national debt was $2.92 Billion in 1913 and nearly $17,000 Billion in 2013. The compounded annual increase since 1913 has been 9.04% while the increase since 1971 has been 9.31%. National debt increases, on average, quite consistently. Given that consistent exponential increase in national debt, are you surprised that the prices for gold, silver, crude, gasoline, food, and housing have also substantially increased, on average, every year?

The Big Picture

Silver gained 7.7% in 50 days. I think December marked a double bottom in the silver market, but we’ll know in a few months. Crashes and large rallies are likely to happen more often in this era of High Frequency Trading and “managed” markets.

The national debt has been increasing, remarkably consistently, for 100 years, for 42 years, and for 6 years. Until monetary systems, administrative policy, and congressional spending practices change (return to fiscal sanity) the national debt, along with most other prices, will continue to increase.

We don’t know if silver will continue its rally through next week or next month, but we can legitimately expect that silver prices, along with the national debt, will be substantially higher in 2015, 2016, and 2017!

Examine this graph of silver prices since 2000. Note the following:

  • Log scaling
  • Exponentially increasing prices
  • The support line was touched in December 2013.
  • There is a double bottom in June and December 2013.
  • There is an expanding “megaphone” pattern of prices.
  • Crazy and unlikely as it sounds, silver could spike to $100 in 2016 and not violate a 15 year “megaphone” pattern.
  • MACD (monthly) buy signal in 2008, sell signal in 2011, and probable current buy signal.

So the next time you hear from an analyst that silver is likely to remain under $25 for the next decade or drop to $10, or whatever, remember 100 years of history, 100 years of price increases, and 100 years of official national debt exponentially increasing at 9% per year – compounded each and every year.

My belief is that 100 years of facts are much more relevant than opinions from various people who have a vested interest convincing people that silver and gold are dangerous investments. Examine silver cycles here: Silver: 4 Cycles in 12 Years.

And Clive Maund Analysis here: Silver Market Update

GE Christenson
aka Deviant Investor

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20 thoughts on “Silver: 50 Days and 100 Years


    • Yes, indeed it is. And I am appreciative. But I wrote the article on the 14th using data from the close on the 13th. Silver made a big move up was on the 14th. And yes, 12% is a great move up.

      Thanks for your comment.

      GE Christenson
      aka Deviant Investor


  1. Hi Chris, a very good piece you have passed on. Too bad some either don’t appreciate it and nit-pick or don’t fully understand it. If you don’t understand or just want to nit-pick, why write and show lack of understanding? LEARN FIRST, then write. 17,000 billions is not understood as 17 trillion? C’MON! Common sense tells ALL of us what you mean Chris! But after 74 years of seeing this stuff over and over on financial blogs comments, I praise you for having the patience of a saint in answering these goofy comments. Taking 4 points to explain is VERY patient. And they don’t really appreciate it anyway you know. Finally, a guess by me, the comment by American Patriot was meant to address the comment by Vess about HIS comment on silver as an industrial commodity as a worrisome investment in a breakdown of some sort.

    My outlook is that the world will stagger on somehow and silver will be in HUGE demand for medical, electronic, industrial, and transportation use as there is NO replacement suitable as of now and for MANY years, decades probably, that can replace silver for these VERY special applications. SILVER is irreplaceable, in MANY ways! Period! There is plenty of gold above ground. Silver, not so much! And because of THAT I have a LOT of silver! As well as gold.


    • Thank you for your comments and appreciation.

      I completely agree with you that silver will be in huge demand for medical, electronic, industrial and transportation use. And please add investor demand – which is important and likely to substantially increase. And not just in the US and Europe – but in India and China. Silver prices have been suppressed for so long and most above ground stocks have been used so as I see it, the fundamentals are quite strong. But I can not second guess the futures players who have immense SHORT TERM influence on the price. Long term, prices are going much higher.

      I’m waiting for much higher prices.

      Thanks

      GE Christenson
      aka Deviant Investor


  2. I believe that silver remains in a bear market until 3 things occur:
    1 The downtrend from the top is penetrated. This has not occurred.
    2 $26 is broken. On the day silver broke down, a record volume of silver future contracts were traded and silver crashed $3.5. This is monumental resistance.
    3 Silver prices are controlled by futures. Banks (commercial traders) move the price down and large speculators (hedge funds and large private traders) move the price up. Large speculators must hold a large long position similar to the 2011 run up. Hedge funds are holding few long positions and have not added. This leaves silver vulnerable to more attacks.

    The recent rally has been short covering or profit taking, not new net longs. The price of silver is prone to lower prices until these 3 things occur. Please verify for yourself.

    If we get all 3, the dynamics and sentiment have truly changed.


    • Thank you for your response. My comments:

      1) You have identified 3 objective and sensible measures that will indicate to you that the silver market has turned up.
      2) I understand your criteria and understand your reasoning.
      3) However, I partially disagree as I think much of this is subjective interpretation as to what criteria are important and what defines a new up move.
      4) Example: I draw a trend line (weekly chart) from November 2012 that moves downward to about $20 in early Feb. 2014. This line has 5 or 6 “touches” on the weekly chart and is, in my opinion, good enough to indicate the downtrend has been broken. You can argue that the trendline must originate from the April 2011 high – I can argue that the Nov 2012 high is relevant. This is, in my opinion, a matter of interpretation and perception – not inarguable fact.
      5) I would like to see $24.50 taken out on the upside. That has not occurred. Point to you.
      6) I characterize the silver market as in a correction to the ongoing bull market – also a matter of interpretation. But in my view we have substantial horizontal support at about $20 going back to Aug 2008 that has held. This is another indication the correction is over.
      7) Again, interpretation. Your criteria are sensible and very conservative. You may lose several dollars if silver breaks above $26, as I think it will. Or, you may save some anxiety if it breaks down again, as I think it probably will not. We shall see.

      GE Christenson
      aka Deviant Investor

      Again – thanks for your comments. Others will probably find value in your comments and your thinking.


      • Thank you for your replay and observations. I am aware of most of the points that you make in your reply.

        On Friday April 11, 2011 silver was at $27.70, the next trading day, silver was at $22.70. On April 14, silver traded 21 million futures contracts according to Netdania around the world, an estimated 100 billion paper ounces of silver representing 100 years of production. The power to move silver $5 in a single 24 hour period still exists. @26 is a great barrier. I am not sure what force on earth that is going to take out that price anytime soon. Silver is a technical and non-fundamental market at the moment. Think of oil at $10 in 1998 and $33 in 3009 for a parallel comparison.

        I am bullish metals, but I realize the forces that caused the breakdown in the first place. As mentioned before, this is a short covering rally, so far. Time will tell if there is enough buying power to overcome the shorting forces at hand.

        Thank you for your time and feedback. Regard!


        • Thanks for your comments. Time will tell… you are correct on all points above, in my opinion. But remember that silver was under $9 in 2008 and nearly $50 in April 2011. A similar rise could put silver over $85 in 2015 or so.

          GE Christenson
          aka Deviant Investor



    • I put the national debt in billions so it would be easier to compare to the debt in 1913 and 1971. As we all know, 1,000 billion = 1 trillion (US)…

      so 17 Trillion = 17,000,000,000,000 = 17,000 Billion = 17,000,000,000,000.

      so the article correctly states (for the US) that the national debt is about 17 trillion when it states 17,000 billion, since the two numbers are the same.

      example: $1,700 = $1.7 thousand

      I hope this clears up the numbers.

      GE Christenson
      aka Deviant Investor



    • I put the national debt in billions so it would be easier to compare to the debt in 1913 and 1971. As we all know, 1,000 billion = 1 trillion (US)…

      so 17 Trillion = 17,000,000,000,000 = 17,000 Billion = 17,000,000,000,000.

      so the article correctly states (for the US) that the national debt is about 17 trillion when it states 17,000 billion, since the two numbers are the same.

      example: $1,700 = $1.7 thousand

      I hope this clears up the numbers.

      GE Christenson
      aka Deviant Investor


  3. Any examination of the price of gold in US dollars before 1971 is simply misleading. Before that date the gold-dollar ratio was not determined by the free market but was established by government fiat – i.e., it was unnaturally low. So, one explanation of the rise of this ratio since then is that it had to work out long years of artificial suppression. Excesses to the downside lead to excesses to the upside and vice versa.

    That said, my personal technical analysis suggests that gold (measured in US dollars) has bottomed in December 2014 a new leg up is underway. While silver will probably outperform gold (as it usually does in gold bull markets), I’d say away from it myself.

    My problem with silver is that it is not only primarily a monetary metal (like gold) but also an industrial commodity – and my outlook of the global economy is very, very grim. Furthermore, the silver market is much more volatile and is dominated by speculators. It is simply not suitable for people like me whose main goal is to preserve the buying power of their capital.


    • Thank you for your comments. You bring up interesting points. I’ll try to respond to them.

      1) Yes, the gold and silver markets were suppressed by government intervention into the 1960s and 1971. That suppression was released and both gold and silver zoomed much higher from $35 in gold to over $800, as we all know.

      2) I think (just my opinion) that the compensation for repression was over by about 1980, and since then prices have been more or less normal – partially driven by markets, partially driven by a political agenda, partially goosed higher and then suppressed for banking profits – etc.

      3) I’m pleased that you agree that we are in a new bull leg now and that Dec 2013 marked a major bottom.

      4) Silver is, as you say, volatile and industrial. So yes, it will be an interesting investment. I like it but also like gold. To each his own.

      Thanks for your comments.

      GE Christenson
      aka Deviant Investor


    • Agreed, economic collapse will have a negative affect on the price of silver to the extent that it is consumed as an industrial metal. But that is no reason to stay away from silver as a store of value. The silver market is incredibly small as compared to gold and yet the two have a long history as monetary metals. I believe the monetary premium about to be applied to silver as it regains its historic role as a monetary metal will be more than sufficient to offset any drop in demand by the industrials. Your analysis and ideas in this regard are much more suited to Platinum and Palladium. Those have provided virtually no historical value as money. When Automotive manufacturing drops like a rock in our coming ‘religious experience’, price of PGM may also drop significantly.


  4. There is an error on the second sentence.
    •Silver closed on February 13, 2014 at $21.42.

    •50 days earlier, on December 26, 1913, it closed at $19.88

    Should say December 26,2013


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