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Is the gold and silver bull over? Can we all
sell our core and speculative holdings in anticipation of another precious
metals desert ahead? The action in gold and silver since the crash of March
2008 would make us wonder if the multiyear moves in these metals is over.
I was never inclined to accept that but a recent finding has made me
modify those views. In a nutshell, there will be a desert for gold and silver
but it is not yet and this bull is not over yet.
The reason I believe this is because of the gold M2 money supply. Now
wait a minute, isn't M2 a measure of fiat dollars and not gold? That is true
but gold has its own M2 equivalent because it is money too and this is
measurable. All you need to know are the annual mining numbers and how much
gold has ever been mined.
Now the annual percentage change in M2 dollars looks like this below
(recessions in bars). You can see how wildly the pump has been primed over
the decades as the economy lurches between overcapitalized and undercapitalized
by money men who either set the price of money too cheaply or too
expensively.
Now take a look at the annual percentage change in the gold M2 supply
for the last 109 years.
Unlike M2 dollars the pace of M2 gold creation accelerates and
decelerates at a more sedate pace between 2.5% and 1.2% per annum. The
astonishing thing though is the regular periodicity of the peaks and trough
with about 30 years between turning points. In fact it is so regular than one
could dare to say that it predicts that this gold and silver bull market is
not over! If we superimpose the price of gold (in red) on the graph we get
this:
As the gold M2 supply decelerates, the price of gold enters a bull
market. When it accelerates, the price of gold is in a bear market. Previous
decelerations lasted at least 13 years - this current deceleration started in
1999 and is only 10 years old. I unpack this more in my latest newsletter but
my message to fellow gold and silver investors is this: "This bull
market ain't over yet!".
The Silver
Analyst
http://silveranalyst.blogspot.com
Also by the
Silver Analyst
Further analysis and comment on the silver market
can be read in the subscriber-only Silver Analyst newsletter described at http://silveranalyst.blogspot.com where readers can obtain the first
issue free. Comments and questions are also invited via email to silveranalysis@yahoo.co.uk.
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