Now seems like a good time to update my commentary about the two year silver cycle. In 2007, I identified the silver price surges of 2003 and 2005 as a possible repeating pattern, and I guessed that buying silver in the summer of 2007 and selling it in the following spring could produce substantial profits. That proved to be a good call and timely too, since silver bottomed only a few weeks later and then moved sharply higher into the spring of 2008 that I identified as a good time to sell. Unfortunately, I also guessed that the following up cycle would be from the summer of 2009 to the spring of 2010. Since there wasn't a major rally then, the two year silver cycle seemed questionable. The major rally in silver from the summer of 2010 to the spring of 2011 added confusion because it looked like silver rallies were almost random.

Looking back from a few years later, I now think the two year pattern may well still be a force to consider in the silver market. My guess is that the unprecedented financial disaster from 2008 to 2009 did more than depress the price of silver. That time of great economic uncertainty also caused the silver rally predicted for 2009 to miss a year and begin in 2010 instead. If that view is correct, then the implication is that silver is due for another substantial rally, beginning in the summer of 2012 and continuing into the spring of 2013. The updated table below shows the results of the rallies since 2003, and speculates on the potential profits from buying silver now and selling in the spring of 2013.

The top of channel line in the silver chart below extends to almost $95 by April 2013. In a rally of that magnitude where the price of silver more than triples in 10 months, overshoot to $100 is easy to envision.

For those who prefer gold, the two year silver cycle projects good news for them too. The chart below shows the comparable gold rallies, and the top of channel projection to $3,000 by April 2013, so gold could potentially almost double in the next substantial rally.

Note that this commentary builds on the "foundation" of Optimistic guesswork, so caution is recommended, and DYODD is required! Here's hoping, however, that all of us have much better luck than the banksters who will be selling short into the next big rally!

2 July 2012

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* * * Notice * * *
This commentary presents only the viewpoints of the Optimist, and it is intended only for perspective and entertainment. Please do not interpret any portion of this work as investment advice. If any of the concepts discussed here appeal to you, then you must do the work to decide if and when and how you should invest. The Optimist does not ask for any profits you make, and he cannot be liable for any losses incurred as a result of your investment decisions. The Optimist wishes you the best of luck in whatever you decide to do or not to do. Cheers!