Silver Ready To Breakout - Technicals And Fundamentals Suggest $50/oz In Early Autumn

Tyler Durden's picture

From GoldCore

Silver Ready to Breakout - Technicals and Fundamentals Suggest $50/oz in Early Autumn

Gold and silver have fallen after yesterday’s gains due to the very poor consumer confidence data and Federal Reserve murmurings of further monetary easing. Gold is trading at USD 1,792.50, EUR 1,245.10 , GBP 1,098.30, CHF 1,471.50 and JPY 137,624 per ounce. While silver is trading at USD 41.21, EUR 28.53 , GBP 25.31, CHF 33.33 and JPY 3,155 per ounce.

Gold’s London AM fix this morning was USD 1,826.00, EUR 1,264.19, GBP 1,121.14 per ounce. Gold fix was higher than yesterday’s AM Fix which was USD 1,791.00, EUR 1243.49, GBP 1097.56 per ounce.

Gold remains less than 5% from its record nominal high of $1,913.50 per ounce while silver remains nearly 20% below its record nominal high just below $50/oz.

Gold has stolen the limelight from silver in recent weeks with gold reaching a series of new record nominal highs.

But silver has been quietly consolidating after the sharp falls seen at the end of April and in early May when many claimed the silver ‘bubble’ had burst.

Media coverage of silver remains nearly nonexistent which is bullish from a contrarian perspective.

Technically silver is looking better by the day and is now trading not far above its 50 and 100 day moving averages (see chart above).

Today the 50 day moving average is trading at $38.70/oz and the 100 day moving average is trading at $38.74/oz. The 50 DMA is rising after recent price gains and looks set to cross the 100 DMA in the coming days. This will be a bullish technical signal.

Silver’s sell off was very sharp but volatility and a correction was expected and warned of once silver reached the nominal inflation adjusted high of $50 per ounce.

Value buyers continue to accumulate silver bullion. Jim Rogers, one of the most prescient investors of recent times and who arguably has a better track record than Soros in recent years, remains bullish on gold and particularly silver.

A tiny minority of retail investors has begun to look at silver, but it remains largely the preserve of the smart money, a very small amount of people in the US and Europe concerns about currency devaluation and store of value buyers in Asia.

There are many factors that strongly suggest that silver remains a prudent buy and diversification today.

But there are three key metrics which strongly suggest that silver remains far from a bubble if not undervalued.

The first is silver’s real price today adjusted for the inflation of the last 31 years. Silver’s real high in 1980 was $130 per ounce – more than double the price today (see chart above).

The second is the gold silver ratio which has averaged 15 to 1 throughout history due to geology and the fact that there are 15 parts of silver to every 1 part of gold in the earth’s crust.

Gold Silver Ratio – 40 Year (Quarterly)

Silver, unlike gold, is an industrial metal and a very significant amount of all the silver that has even been mined has been consumed, like oil, since the dawn of the industrial revolution in the 19th century.

Most analysts with a long term view believe that the ratio is likely to revert to the mean of 15 to 1 in the coming years.

The third metric is comparing silver’s current bull market to that of the 1970’s.

Silver has risen by a factor of 10 in the last 9 years – from near $4 in 2001 to over $41 today.

In its bull market from 1971 to 1980, silver rose by over 3,199% or by a factor of more than 32 in just 9 years culminating in the blow off top in 1979.

Today, the physical supply of silver bullion is much less than in the 1970’s. Also there is the ‘Asian factor’ and 3 billion people with growing incomes, many of whom see silver as a store of value against currency depreciation.

Demand for silver in Asia has been increasing and in China alone silver demand is increasing from a near zero base. The demand was not present in the 1970’s.

Were silver to replicate the performance of the 1970’s it would have to rise 32 times or to $130/oz (32 X $4.05).

Interestingly, $130/oz is also silver’s real high from 1980.

Our long held belief that silver could reach the real high, inflation adjusted, of $130/oz remains. However price forecasts should always be taken with a pinch of salt and silver’s value is as financial insurance and a store of wealth that cannot be debased.

For the latest news and commentary on financial markets and gold please follow us on Twitter

(Gallup) -- Americans Choose Gold as the Best Long-Term Investment

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(Bloomberg) -- Gold May Drop as Rally on Federal Reserve Minutes Prompts Investor Selling

(CNBC) -- Italian Town Mints Own Money to Fight Austerity

(Forbes) -- U.S. Elites Begin To Confront The Paper Dollar

(Money Morning) -- Why Gold Will Replace U.S. Treasuries as the World's Last Risk-Free Investment

(GoldSeek) -- Can we Trust Government Statistics on the Economy?

(King World News) -- Stephen Leeb - Gold Skying Because of Bernanke Desperation

(Speculative-Investor) -- Steve Saville - Gold: The Big Picture

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DefiantSurf's picture

I enjoy fondling my silver & gold whilst reading ZH articles like this


bankruptcylawyer's picture

thats not all you enjoy fondling. 

papaswamp's picture

shhhh bitchez!...I'm still buying. Don't spoil it.

spiral_eyes's picture

Not sure about this. In this liquidity trap/ debasement environment the only assets I see really flying up are gold (going to $2500) and treasuries (going to 0). Silver's image as an industrial metal won't help it in the way gold's role as money will. I see silver to $50 by the end of the year. Doubt it will test any higher though, especially not if Europe blows up.

spiral_eyes's picture

I already bought mine at <$10 and <$20. Silver is going to blow up eventually, but only when the hyperinflation hits. You don't get that just from printing. You need an oil/oil infrastructure/geopolitical shock to trigger that. 

Gordon Freeman's picture

I am no silver bug, but there is absolutely no technical or fundamental reason that "silver is going to blow up"--ever.  That's like saying food is going to blow up

tmosley's picture

You're right, you aren't a silver bug.

You are also wholly ignorant of the supply/demand fundamentals of the silver market which dictate a major rise in price, which can either be orderly if the markets are allowed to operate properly, or highly disorderly in the form of a blow off top if price suppression efforts continue until they can't.  Those are the only two options, short of construction of a space mining fleet to flood the market with silver from the asteroid belt.

mrgneiss's picture

Anyone who understands economic supply/demand fundamentals, dynamics, would never compare the economic good "silver" to the economic good "food".  It is like comparing the economic fundamentals of oil and coke (the drinkable one).  For example, on the supply side, it takes on average seven years from geophysical prospecting to mine production for a silver deposit, and the timeline is increasing due to environmental regulations.  Whereas in many countries that produce rice, the farmer can harvest three crops a year.

Crisismode's picture

BTW, the asteroid belt mining thing . . .


that's in the works.

Libertarians for Prosperity's picture




Can you please tell me when "the supply/demand fundamentals of the silver market" began to "dictate a major rise in the price?"  When did this occur and why?  You might want to be careful in your answer, because I, too, am not a silver bug and that works to my advantage.   

Warm regards...  

Libertarians for Prosperity's picture



....and crickets, as usual.   

Just more hollow rhetoric full of drama and devoid of substance from the leader of the silver lemmings.  Only the empty headed silver goons who make comments like "silver will default" (see comment below) believe your melodramatic garbage, cliff. 

fiftybagger's picture

I know nothing about the subject at hand, but I will still speak in absolutes regarding the technicals and fundamentals.  I am a moron.

tekhneek's picture


He probably thinks gold's more rare than silver, too.

Crisismode's picture

And diamonds . . .


the rarest of them all. /sarc

cossack55's picture do not see all that coming?

passwordis's picture

   Say what? Silver's image won't help it?   $4 to $50 in 9 years....  What more do you want? Why would silver's "image" suddenly hurt it now?

 Look at it this way, You can go to the wayback machine and pull up 10 year old arguments against the rise in the silver price. The bears said the same thing back then as they do today.   That silver is going nowhere or if it does, it's a bubble..

 You can also read what people like Bob Chapman, Jim Sinclair and James Turk said 10 years ago.  Based on hindsight you can decide who was correct..  Then listen to what these same people are saying today.

 I have no reason not to continue to trust those same people who told me to buy PMs ten years ago.  They said it was goign to rise, It has by a factor of 10..  Today, they say it's going to rise much higher because the fundamentals haven't changed.

  10 years after I bought my first gold coin, I no longer need to be guided by the experts. I have a good understanding of PM fundamentals.  My litmus test is as follows,  If you think the Government is goign to do the right thing... don't buy PMs.  If you think the government is going to continue to do the opposite of the right thing.. buy Silver and gold.


 That's what it really comes down to.


spiral_eyes's picture

The difference is that the rise from $4 to $50 took place within the context of a manufacturing and weapons boom. Most of the silver used during this period has been in manufacturing. A full-on depression may change that. Now I'm not saying silver will drop, because it is exceedingly scarce, and it is (debatably) part of the true monetary base. But a depression does remove a lot of upward pressure, which is what leads me to my thesis that we're looking in the next six months at mild to moderate upside. Look at what happened to oil after Lehman: all the peak oilers said it could only continue to climb, and they were wrong. 

passwordis's picture

  Industry consumes only about 30% of the silver supply although, that percentage is rapidly growing with new applications and technologies. I attribute the rise in price over the past ten years to small investment/hedge demand. My local PM dealer tells me each year he sells more silver than the last. 

 At any rate, the trend is securely in place..  What happens over the next 6 months does'nt much matter to me. If you want to trade back and fourth, more power to you. I"m not a trader.

  Hindsight is 20/20 and in 5 years we will see where silver is and have a debate over what brought it there.

achmachat's picture

I honestly also want to hear the reason why it could be a good idea to short silver right now.

I am sure there's a bunch of you reading this, and it would be quite educational to hear both sides.

Sudden Debt's picture

Merkel just agreed to fund the european emergency fund.

If her party isn't canned next month, the euro will lose about 15% in the short run.

And America.... do I really need to explain that one?


DosZap's picture

SD, Told Ya.................knew she would CAVE,her butts gone.

Sudden Debt's picture

You where right. I didn't think she'd do it. It's German suicide.

But there's still a chance that next month when her party meets that they'll kick the plan again. And that has already happend 2 times this year.


NotApplicable's picture

It was a foregone conclusion the instant she received her award from Obummer.

Snidley Whipsnae's picture

Sept 7th the German high court to decide if German participation in bail outs is constitutional...

Probably a rubber stamp, but not a done deal.

gwar5's picture

I was surprised to see Germany do that, but I suppose they have their orders from the cartel.  The EU members will be calling the Germans Nazis again when the new conditions are pushed and the Italians and Greeks continue to skirt them.






passwordis's picture

The only reason I could come up with is that the people shorting gold and silver understand the manipulation and are trying to take advantage of the periodic smack-downs.  Heck the short positions are probably held (by proxy) by the same people smacking the price down.

GoatETF's picture

Heck the short positions are probably held (by proxy) by the same people smacking the price down.

Spent some time on GATA and you can derive a more informed opinion on that one.

IQ 145's picture

There honestly isn't any good idea involved in shorting silver "right now". Although market performance is always only a probability; the odds are not in your favor.

Sudden Debt's picture




achmachat's picture

you know very well that with what is happening around the world, the currencies won't be able to stay stable that long.

ever thought of borrowing now the amount of money you'll be getting at the end of the year to buy that silver now?  

Clay Hill's picture

Already done. But only as much as I can afford to lose.

Or, stated differently, I curtailed my regularly scheduled gambling in exchange for physical now. My monthly expenditures actually went DOWN, and the shiny is already in my hand.

Sudden Debt's picture

borrowing for silver isn't what I really want. 

Buy when I have it. I hate takeing a loan.


tekhneek's picture

But your loan will be in paper, not silver. You won't owe "anything" after a certain amount of time passes.

Think of it as leverage.

Borrow 10K and make $100/month payments @ whatever interest they charge you, even if it's 30%, you'll beat that with the gains from silver in the long run.

ozziindaus's picture

That is so 2005 home flipping talk

RockyRacoon's picture

If you're saying there is a parallel between real estate and precious metals, you should stay out of both markets.

IQ 145's picture

The way this is actually done is called "margin"; but it's not for people who are on un-evolved that believe a coin collection is a retirement account; if you recover from the internet brainswashing enough to realize that there are several honest and reliable agencies that sell custodial receipts for silver, then you'll be able to finance silver on something closer to 4.5%/year. If you can't outgrow the blog wisdom, then you're just stuck with whatever you can buy and hide, I suppose.

BorisSDT's picture

We agree that silver is about to breakout and have developed a theory on what's going on with silver.  It may be a little tin foil hattish but it makes more sense than any ohter theories we've heard... at least that's what we think.

HITMAN56's picture

Well its almost FB early Autumn is upon us. Hi Ho Silver!

Hugh G Rection's picture

Hey Hitman, how's the weather in Langley today?

Thunder_Downunder's picture

mmmm recycled. Can I have my 2 minutes back, I thought this was an analysis piece.


Nothing new here, please move along. 

thunderchief's picture

Silver in the 30's and 40's will be similar to when it was in the teens.  Long gone and not coming back. 

The big ticket issue going up to 50 are JPM and HSBC, which have massive un backed silver short positions, and will throw loads of cash to pummel the price.  This in collusion with the cftc, (5 margin hikes along with a major take down during afterhours trading in Late April) makes Silver out of kilter with any fundamentals. 

Everytime the banks pull their paper bids on off peak hours, and knock the spot price down, it creates physical buying, and a further shortage of Available silver.  Just look at Comex available silver.  One hedge fund could clean them out in a day.  This will lead to a default at some point.  The paper game works as long as cash settlements occur and no default.  This is a game of chicken the big banks are playing everytime the go after the spot price. 

So keep buying the physical and back it up with some good silver mining stocks. 

tekhneek's picture

Agree with you entirely.

I read an article by a hedge fund manager basically explaining that, right now, the Fed is playing an extremely dangerous game. He's basically saying they're to blame for the coming collapse (duh) but for different reasons than we'd use. He's coming from the angle that there's only so much physical silver left, a few billion dollars maybe? He could allocate 5% of his fund into physical silver to diversify against inflation and immediatey bring down the COMEX which would cause a run on the banks, etc.

He blamed monetary policy for crashes/collapses and he explained it equally. If you force the large chunks of money to move so they can stay net positive over inflation and other factors then you're to be blamed.

Bernanke's putting the funds in a corner and pretty soon they'll know there's no longer a safe haven outside of gold and silver. Some of these guys are dumb, but they're not all dumb and all it takes is 1 or 2 to get their position first and that will begin the collapse. I think this time around it's going to be fueled by hedge funds first, then all the other falderall later.

GoatETF's picture

Was that read here on ZH? If not link plz.

sudzee's picture

33% think gold is the best investment?

Yesterdays poll.

23 people entered the shop.

23 people sold gold and silver to me.

Bullion leaving the shop-0

9 phone enquires:

8 - how much do you pay.

1- do you have any silver for 5 bucks.

Who did Gallup poll?

Chinese and Indians?

MonkeySmoke's picture

The 32 people that you spoke with yesterday will regret that decision in very short order.

DosZap's picture


That was the Bernanke Bubble Poll.