What Crude Oil Says About Silver

Gary Christenson - Deviant Investor

 

If you want to know where silver prices are going, ask crude oil!

 
 
Crude Oil Prices:

 

December 1998            Crude Oil price was under $11

January 2000:               Crude Oil price was about $24

July 2008:                      Crude Oil price topped about $147

December 2008:           Crude Oil prices crashed to about $35

June 20, 2014:               Current price is about $106.

 

Summary:  Prices are volatile, spiked high and low in 2008, and have, on average, risen steadily for the past 14 years.

 

Politics:  The situation in Iraq, a major oil producer, seems to deteriorate every day.  The chaos and violence could easily spread and that chaos and violence will reduce supply and kick crude oil prices higher.  Adding to the chaos, central banks will “print” more euros, yen, and dollars and governments will add to their mountains of debt.  Price inflation will accelerate and the dollar will weaken further.

Demand:  More cars in Asia need gasoline.  Even if the world economies contract, demand for crude oil should continue to rise.

Conclusion:  Crude oil prices have many reasons to explode higher and few to drop lower.  The trend has been up for more than a decade.  Central banks will print, politicians will instigate more wars and invasions, and each euro, yen, and dollar will purchase even less crude oil and gasoline.  It is business as usual, but with an extra dollop of chaos, war, and price inflation tossed into the mix….

 

 

Dennis Gartman: 

“It’s abundantly clear that Iraq as we know it will cease to exist in the not very distant future – probably within the next year and a half.”

 

Arabian Money:

 “Only this time may be different.  The geopolitical crises unfolding in Iraq and also the Ukraine do not look like passing convulsions.”

 

Conclusion:  Higher oil prices, more military spending, more debt, more chaos, higher consumer prices.

 How does this relate to silver?

The following graph shows the price of crude oil in black – left axis, and the price of silver in red – right axis, for the past 12+ years.  Both lines have been smoothed with a 52 week simple moving average of weekly crude and silver prices.

1)   Crude and silver have been trending upward for 12+ years.

2)   The dotted lines are approximations of their linear trends – clearly upward.

3)   The 52 week moving average of crude is about $100 – below the linear trend.  Market price is a bit higher with plenty of room to spike much higher as Middle-East and Ukrainian warfare escalates.

4)   The 52 week moving average of silver and the current market price are both about $20 – well below the linear trend.  Silver could more than double in price and not violate the 12+ year upward trend.

5)   Crude oil prices are moving higher and silver prices will follow.

6)   Statistical correlation between crude and silver for 12+ years of weekly smoothed prices is about 0.84 while correlation between unsmoothed weekly prices is about 0.79.  Crude and silver prices are closely aligned in the long term.

 

Crude Oil and Silver Comparison

Crude Oil and Silver Comparison

Regarding gold and silver:

 1)   Statistical correlation between 52 week smoothed gold and silver prices is over 0.97.  If gold is going higher, so is silver.

2)   Richard Russell: “The Bear Market in Gold is Over.”

3)   Jim Sinclair:  “30 reasons, 23 new and 7 set in cement, of why the Bear phase in the bull market for gold ends this summer without any new lows.”

 

CONCLUSIONS:

 1)   Crude oil prices have been going up for 12+ years and will continue to climb.  Politics and war will accelerate the price increases.

2)   Silver and gold prices have bottomed and are resuming their bull markets.  Expect much higher prices.

3)   Rig for stormy weather – coming in from Iraq, Syria, Ukraine, Russia, South China Sea, “amateur hour” in foreign policy, more wars and invasions, and much of Asia reducing their dependence upon the dollar and Treasury bonds.

4)   Preparation is essential.

5)   Silver purchases are good preparation.

 

GE Christenson

The Deviant Investor

 


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7 thoughts on “What Crude Oil Says About Silver

  1. Aw, this was a very good post. Taking the time and
    actual effort to produce a very good article…
    but what can I say… I procrastinate a whole lot and never seem
    to get nearly anything done.


  2. Central bankers are a clubby lot- I once saw an invitation to one’s private art collection exclusively for other bankers (and people generally think they are part of “government”(!)), but how does Central Banker A really know how much paper Central Banker B is surreptitiously printing in his basement? Contrary to Jim Sinclair’s declaration that “central bankers have no secrets” the answer is they do not, a fact all the more highlighted by the Fed’s rigging interest rates- only for the banks which own it- to near zero for now and into ‘the foreseeable future.” The whole idea of the gold standard- or any standard, is that the attendant printing of money constrained only by the limits of new national debt creation is unacceptable. But instead of an honest standard, such as existed prior to the Fed’s appearing on the scene, what appears to be in the offing is some kind of “private label gold standard.” Workers whose wages are continuously being eroded should demand better, but the MSM will, as ever call leaders demanding this “agitators.” The expression “make peace with gold” has everything to do with making peace in general


  3. Gary, the Survey is quite misleading as there are no national currencies presently, only Central Bank currencies in circulation, which have been deceitfully sanctioned to defraud via “fractional reserve” leveraging/ counterfeiting, and that my friend is way too powerful of a perk to relinquish without a fight. Cheers & Semper Fi, Spartacus Rex


    • Thanks for your comment. I have to agree that such fractional reserve currencies are a way too powerful perk. But some country might decide they have more to gain by creating a gold backed currency and it might occur.
      The Deviant Investor


  4. Don’t know about 2017 but sooner or later, it’s inevitable. Even if the central banks only partially back their currencies, it’s a good start, to make them at least partially accountable. What will be the real shocker, is the number of third world countries, whose current wheelbarrow currency status, will suddenly become wealthier than the US, who sadly, may not be able to recover for many years.


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