Close X Cookies are necessary for the proper functioning of 24hGold.com. By continuing your navigation on our website, you are accepting the use of cookies.
To learn more about cookies ...
EnglishFrench
Gold & Silver Prices in

Did the Silver Bubble Burst ?

IMG Auteur
Published : January 12th, 2012
605 words - Reading time : 1 - 2 minutes
( 7 votes, 1.3/5 ) , 3 commentaries
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
3
comment
Our Newsletter...

 

 

 

 

Gold bugs argue that Gold is far from being a Bubble. Especially not when you look at the following comparison, which plots Gold's rise versus the Nasdaq's rise in the 1990?s.




Chart: Marketwatch


The Bear Camp (including Nouriel Roubini for example), argue that Gold is (or was) a hyperbolic bubble that is about to (or already has?) burst:




Chart: Forbes

I like comparisons because - although history doesn't repeat exactly - I think it rhymes, and when I look at both charts seperately, I think both are very nice.

However, what if the Bulls are comparing the wrong asset to the Nasdaq Bubble? What if they should rather look at Silver prices?

Back in April, I felt silver was a Bubble, as price was going VERTICAL, which (as all good things) never lasts forever. The parabola burst in April, and usually, it takes a LONG time before the next move up will start (if it ever will).



Chart courtesy Prorealtime.com


Now how is that related to the Nasdaq Bubble?

Let's first look at how most (if not ALL) bubbles evolve.

·         First, the Smart money comes in. They buy it because it's undervalued, and they see a lot of potential. The markets are not aware of this.

·         Second comes the insitutional money. The institutional investors are now also aware that the asset has a lot of potential. After the nice run up, price corrects. Everybody says: this is the end of the bull market, but actually it's a bear trap.

·         When price resumes its uptrend, then comes the public: "look at what this asset has done over the last couple of years, it can definitely go higher". It starts with enthusiasm, then comes greed and eventually, we get a "New Paradigm": Look at fundamentals, this is a 10 bagger from this point (forgetting that it already rose 10-fold). Then the markets drop. The bulls say that it's just a temporary correction after the huge run up over the last couple of years. Then the markets rise again. The bulls will say: You see, the bull market has resumed. This is the Bull Trap. When suddenly price falls below the previous low, the chartists get scared, and stoplosses are being hit. More selling follows. Now everybody panics. Then they capitulate: "I've had enough of this. I'm sick of it, I'm out". Usually, price drops too much, too fast. Eventually, price returns back to the mean.






We can clearly see this pattern in the Nasdaq "Bubble" of the 1990?s:




Chart courtesy Prorealtime.com

In fact, the Nasdaq is not the only "Bubble" of recent times that has burst. Think about the Chinese stock markets for example, hereby represented by FXI (iShares China 25 ETF). Do you see how similar FXI behaved to the NASDAQ (even AFTER the bubble had burst)?






Chart courtesy Prorealtime.com


Now let's have a look at the "Silver Bubble". It's following nearly EXACTLY the "Bubble Pattern" discussed above:




Chart courtesy Prorealtime.com

In fact, when we compare Silver to the Nasdaq, we get a much better comparison than when we compare Gold to the Nasdaq Bubble:








Chart courtesy Prorealtime.com

We might now get the "Bull Trap", which means Silver might rise back towards $37-$39. This would also be the target of the red channel in the following chart:




Chart courtesy stockcharts.com

When price hits that level, and then turns down, the last phase of this Bubble can start: Capitulation.


There is one sector which I believe is at or very close to forming a "post-Bubble" bottom. To find out which sector that is, please visit www.profitimes.com and feel free to subscribe to our services!

 

 

<< Previous article
Rate : Average note :1.3 (7 votes)
>> Next article
Comments closed
  All Favorites Best Rated  
Dude, you're pathetic, indeed. Coming from a French guy, trust me, this is more than an offense
Rate :   0  1Rating :   -1
EmailPermalink
Dude, you do S-U-X really
Rate :   0  1Rating :   -1
EmailPermalink
Dude, U sux, really
Rate :   0  1Rating :   -1
EmailPermalink
Latest comment posted for this article
Dude, you're pathetic, indeed. Coming from a French guy, trust me, this is more than an offense Read more
Extra Ball - 1/26/2012 at 10:21 AM GMT
Rating :  0  1
Top articles
Latest Comments
The Fed Has Bankrupted the US In Order to Create Another Bubble
29 AprSilverthumb
I believe this bubble will pop, the big question is when. I underestimated the power of the Fed and monetary policy. I believe that during the We...
The parable of the cards
28 Aprdom1971
Please let me take this a step further if I may... because I see an opportunity to highlight a particular concern of mine. Let us ignore f...
Debate Over Electric Trucks: Let’s Get It On
25 AprJerry82
Thanks Mish, this was a very insightful and thought provoking piece. I've often heard concerns about the weight of these new electric trucks and th...
No, The Junior Mining Stocks Are Not About To Implode - Dave Kranzler
25 AprJerry821
Thank you Dave for this excellent article. I agree with your well thought out critiques that point to junior miners being just fine. Relying on tha...
Gold Bullion Erases $10 Bounce Despite French Election, N.Korea Ris...
25 AprJerry82
I don't know how much I'd trust the listed GLD holdings. I always found GLD's structure to be a bit strange. They so famously claim that they are 1...
The Story of Gold Money, Past, Present and Future, by Edwin Walter ...
18 AprJerry82
Thank you for this very thought provoking piece Nathan. I have not read any literature from Edwin Walter Kemmerer before but I am inclined to pick ...
Gold Prices Slip $10 After Breaking Downtrend as UK's May Seeks Bre...
18 AprSam Maher3
"That left the GLD gold ETF needing a 2017 high of 849 tonnes in bullion backing." I frequently see you make these claims on GLD's holding...
Bombs Away!
17 Aprprljr-1
James tribe owns trump.
Most commented articlesFavoritesMore...
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS