Silver – Four Years Later

Silver reached a 30 year high in April of 2011.  Since then it has fallen nearly 70%.  In any correction or bear market – call it what you want – we hear calls for lower prices as the market falls.  Similarly, as a market rallies we hear supposedly well-reasoned arguments why prices should rise even higher.

Examples:

  • Gold peaked over $850 in 1980. There were calls in 1980 for gold at $1,000.  Currently we hear analysts calling for $900 gold.
  • The NASDAQ peaked in year 2000 about 5,000. There were probably a few investors calling for 10,000.
  • Do you remember the call for the Dow at 36,000?
  • When silver was selling for nearly $50 in April 2011, which in retrospect was clearly a move too far and too fast, there were calls for $100 silver. (Note:  $100 silver is coming – the “money printers” and deficit spending governments will make it happen.)
  • It is easy to project the continuation of a trend. But how do we obtain more objective information?  Use Ratios!  Consider:

Silver compared to the S&P 500 index since 9-11.  The graph clearly shows that silver prices streaked higher in 2010 and 2011 compared to the S&P.  The chart also shows that silver is currently low compared to the S&P and that the linear trend indicates the ratio should triple in the next few years.

Silver - S&P

Silver compared to the S&P 500 index for 30 years.  Clearly silver is inexpensive compared to the S&P – based on 30 years of data.  Expect silver to rally.

Silver - S&P

Silver compared to gold prices for 30 years.  When the ratio is low so are silver prices.  But when silver rises, it usually moves much faster than gold so the ratio rises to the high end of the channel.  Note the circled lows in the ratio in 1991, 2008, and 2015.  Significant lows in silver prices occurred in 1991 and 2008.  I suspect late 2014 – early 2015 will be seen, in retrospect, as a significant low in silver prices.  (Repeat:  $100 silver is coming.)

 

Silver - Gold

 

Silver compared to crude oil for 30 years.  Even though crude oil prices have crashed in the past year, the ratio is still in the middle of its 30 year range.  Silver is NOT expensive compared to crude oil.

Silver Crude

CONCLUSIONS:

Based on the 30 year ratios to the S&P 500 index, gold, and crude oil, silver is currently inexpensive.  The High-Frequency-Traders can push prices lower or higher quite easily so this analysis says little about what silver prices will do next week or next month, but it clearly says that in the long-term silver prices are low and likely to rise significantly in the next few years.

If you are stacking silver (or gold) then appreciate the long-term trends and the gift of lower prices that has been given to us by the central banks and HF Traders who wish to pretend that all is well in our global financial systems.

Gary Christenson

The Deviant Investor

5 thoughts on “Silver – Four Years Later

  1. In every bear market I’ve witnessed (and I’ve lived through several of them), there were fools claiming that “the bottom is in” all the way down. How about waiting for a clear trend reversal before making bold claims?


    • There was nothing bold in this article. It showed data, comparisons etc. Yes, $100 silver is coming but that is not bold, just a statement regarding the ongoing devaluation of all fiat currencies. It would have been bold if I suggested that $100 silver would happen in 2016. It will happen, but when is the big question.
      The Deviant Investor


  2. Yes, Gary, I agree. Have been stacking and will continue to do so the longer this plays out. Something big’s about to happen with JP Morgan building up a record inventory of silver, while still having the biggest short futures position. When their time is right the control boyz will start the next phase.



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