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The following silver chart will
be familiar to everyone who follows my work. I first presented this pattern
in my newsletter about twenty years ago, and I have been tracking it
closely ever since, though
recently there has been a twist to the way this pattern has developed.
I have been describing
silver’s long-term chart pattern as a rounding bottom, which shows
distribution from the 1980 peak to the early 1990s, followed thereafter by a
decade trading range and then a decade of massive accumulation. In other
words, over this period silver moved from overvaluation and selling by weak
hands, to undervaluation and buying by strong hands.
The new twist to this pattern is
that the rounding bottom has evolved into a ‘cup with a handle’,
which I have drawn on the chart (outlined in green).
Regardless of the name we call
the above chart, the bottom line is that it is
presenting a very bullish picture for silver. After a decade or so of
distribution, a decade in a trading range and another decade of accumulation,
silver is in strong hands, particularly after the
onslaught it endured the past two years.
Technical analysts will note,
however, that the above pattern is not complete. More of the story has yet to
be told. Perhaps the chart pattern will fail, or perhaps the pattern
will complete in the months ahead with silver moving higher to completely
form the handle, which is what I expect.
Of course, the pattern will only
be complete when silver moves above the lip of the saucer, which is its
record high of $50. If that happens, then silver will begin stage two of
its bull market.
In summary, the outlook for
silver is spectacular, and my recommendation for both precious metals remains
unchanged. Accumulate gold – and if you are inclined to accept the
greater volatility, then accumulate silver too – on a cost-averaging
program with monthly (or quarterly if it fits your budget better) purchases.
By doing so you are saving sound money. Buy physical gold and physical silver
only.
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