Make Kitco Your Homepage
Contributed Commentaries
  1. Kitco Metals Inc.
  2. Commentary Archive
  3. Bio

A Powerful Signal for the Coming Silver Rally

The silver price and the US Dollar/South African Rand exchange rate (USD/ZAR) have a very interesting relationship that goes back a long way. Due to the nature of this relationship, I have found the USD/ZAR chart to be a good tool for determining a silver bottom.

In Jan 1980, when silver peaked at about $50, the USD/ZAR was trading at around 0.817. Today, the USD/ZAR rate is trading at about 14.366 – about 17.6 times higher than the Jan 1980 rate,
whereas silver is trading at $16.2 – almost three times lower than the Jan 1980 high.

So, in the long run, the two move in opposite directions. When the USD/ZAR rate is moving up, then the silver price is moving down, and vice versa. Furthermore, when the USS/ZAR rate is making a top, then a bottom in silver is normally very close (before or after the USD/ZAR peak).

In a related manner, the US Dollar Index provides a good signal for when gold rallies are coming.

Below is a basic short-term fractal analysis of the USD/ZAR chart (from fxstreet.com):

On the chart I have highlighted two possible fractals (with points 1 to 5). The fractals are very similar (the angle is a bit different), and importantly appear during similar conditions (relative to a Dow peak). The second fractal appears to have reached point 5, which is a short-term top for the USD/ZAR chart, and very likely a long-term peak (since 1980).

If it is indeed a long term peak for the USD/ZAR rate, then one should expect a very important bottom for silver around that date. Silver did make a bottom on 14 December 2015, about a month before the USD/ZAR top. This silver bottom will likely proof to be the ultimate low before the coming multi-year rally.

Below, is another comparison (from my 12 Feb 2016 premium update), showing the relationship between USD/ZAR peaks and silver bottoms:

On the chart (from tradingview.com), I have drawn blue lines at the 2001, 2008 and potential Jan 2016 USD/ZAR peaks. One can see how close to these peaks the 2001, 2008 and potential Dec 2015 silver bottoms were.

Given, the look of the Jan 2016 candlestick; it is likely that the USD/ZAR chart has peaked.

If it has indeed peaked, then there is a very strong likelihood that the December 2015 bottom in silver is actually the bottom since the 2011 peak. It is interesting to note that there is a 7-year interval between the silver bottoms.

For more on this and this kind of fractal analysis, consider learning more about my premium service.

Warm regards,

Hubert Moolman
https://hubertmoolman.wordpress.com/

 


Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
kitco news

Follow Kitco News

Precious Metal Charts