Clive Maund provides a technical analysis on
silver and explains why he believes recent movements could be the
"opening shot of a a major bull market."
The last update was wrong. Silver was expected to drop with the stock market,
but instead it held its ground and then broke higher last week. The reasons
for this misinterpretation, both for gold and silver, are set out in the latest Gold Market update, and will not be repeated here.
On the 6-month chart we can see that while gold continued to advance in
December, albeit incrementally, silver continued to be restrained by the
resistance at the upper boundary of what is now clear is a Double Bottom base
pattern, until several days ago when, under increasing positive influence
from gold, it broke clear above it. Since it has arrived at resistance at its
falling 200-day moving average it is entitled to take a rest here, if it
feels so inclined, and consolidate or perhaps react back a little. This
breakout bodes well for the longer-term and may well be the opening shot
of a major bull market.
Although silver's action of the past few weeks may look like no big deal
on the straight silver chart, it looks a whole lot more impressive on the
chart for silver relative to the stock market. This chart shows that silver
was a helluva lot better place to be in recent weeks than the stock market.
This chart also implies that silver is going to continue to perform well as
the great broad stock market bear market unfolds, in marked contrast to what
happened in 2008, for reasons that are set out in the latest Gold Market update, that apply to both gold and
silver.
In light of this break higher, the 10-year chart for silver also looks a
whole lot better than it did just a short while ago. This is because silver
appears to be starting to ascend away from the 2nd trough of a much larger
Double Bottom, within which the much smaller Double Bottom shown on the
6-month chart is embedded.
Note that the latest COTs are not included in this update because they
have been delayed by the Christmas holidays, and will become available early
this coming week.
Now we will look at a most inspiring chart which shows that, regardless of
near-term fluctuations, if you invest in the precious metals sector here, you
will have the deck heavily stacked in your favor. The PM sector has been
about the only one that hasn't become a bubble in recent years, and the way
things are shaping up, it could wind up being the only sector that becomes a
bubble while most everything else is dropping through the floor.
This chart is the one showing the silver to gold ratio which recently
reached a 24-year record extreme as shown by the 20-year chart for this ratio
below, which alone is a sign that the sector is close to a bottom and also
that a major new bull market is likely to start before much longer.
Extreme low readings for this ratio have occurred three times in the past
20 years, each time leading to either a bull market or a big rally. The low
reading in mid-2003 lead to the bulk of the 2000's precious metals sector
bull market. The low reading in 2008 lead to the big post 2008 crash recovery
in the Precious Metals (this time gold and silver DO NOT look set to drop with
the market, because of the more negative outlook for the dollar), and lastly
the low reading early in 2016, when PM stocks were crazy cheap, lead a big
rally into July of that year. The ratio has just been below that low.
Finally, it is worth taking a sideways look at the 20-year chart for the
platinum over gold ratio, which reveals that platinum is astoundingly cheap
compared to gold—at a 20-year plus record low. What is all the more
surprising about this situation is that it exists at a time when the world's
biggest platinum producer by far, South Africa, which produces about 70% of
it, is going to the dogs, as the country is run by zealots who appear to be
intent on taking the same ruinous road as Zimbabwe after Mugabe took control.
The bullish Falling Wedge visible on this chart implies that platinum is
going to break higher soon and probably outperform both gold and silver as
all three metals embark on major bull markets.
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Charts provided by the author.
CliveMaund.com Disclosure:
The above represents the opinion and analysis of Mr Maund, based on data
available to him, at the time of writing. Mr. Maund's opinions are his own,
and are not a recommendation or an offer to buy or sell securities. Mr. Maund
is an independent analyst who receives no compensation of any kind from any
groups, individuals or corporations mentioned in his reports. As trading and
investing in any financial markets may involve serious risk of loss, Mr.
Maund recommends that you consult with a qualified investment advisor, one
licensed by appropriate regulatory agencies in your legal jurisdiction and do
your own due diligence and research when making any kind of a transaction
with financial ramifications. Although a qualified and experienced stock
market analyst, Clive Maund is not a Registered Securities Advisor. Therefore
Mr. Maund's opinions on the market and stocks can only be construed as a
solicitation to buy and sell securities when they are subject to the prior
approval and endorsement of a Registered Securities Advisor operating in
accordance with the appropriate regulations in your area of jurisdiction.