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The Great Silver Chart

Monday September 10, 2012 09:56

A reader asked me to update a previous long-term silver chart of mine. Below, is that updated long- term chart for silver:

Since the last chart, silver has broken out of the pennant formation (on the short-term chart), and is looking really good.

On the chart, I have highlighted two fractals (or patterns), marked 1 to 3, which appear similar. What makes these two fractals so special, is the similarity of the circumstances in which they exist.

There was a significant peak in the Dow (1973 and 2007) between point 1 and 2 of both fractals. Also, point 1 on both fractals represents a significant bottom for silver after the peak of the Dow/Gold ratio.  After point 2, on both fractals, the oil price made a significant peak (1974 and 2008), about 8 years after the peak in the Dow/Gold ratio.

Thanks to this similarity in events, as well as the similarity in sequence, I was able to identify the great possibility for significantly higher silver prices, back in October of 2010. This was a very clear signal that higher silver prices were coming, and that is exactly what we got, when silver moved to $49. However, this run is not over yet. The move from $17, when silver broke out of the triangle (at point 3 of the second fractal) to $49 was just the first part of the move. In my opinion the biggest and best part of this move is still ahead. In my long-term fractal analysis report on silver, I have presented a lot of technical and fundamental evidence to support my opinion for higher silver prices over the coming years.

Based on the fractals on the chart, we could still have about two years before we could get a top like we had in 1980. That is 14 years after the Dow/Gold ratio top (beginning of 1966 to the beginning of1980 vs the end of 1999 to the end 2013).

It is interesting to note that the peak in silver (beginning of 1974) after the peak in the Dow/Gold ratio (beginning 1966) came about 8 years after the Dow/Gold ratio peak. On the current pattern, the 2008 peak in silver was also about 8 year after the Dow/Gold ratio peak at the end of 1999.

With the first peaks after the Dow/Gold ratio top taking the same amount of years, what are the chances that the second peaks will also correlate, giving as a top in silver at the end of 2013 to the beginning of 2014?

Also, from a price point of view, there is also an indication that this move is not over yet. If the two patterns indicated continue their similarity, it would be reasonable to expect the final top of the current pattern to at least go higher than $140 as a minimum. Why? If you measure the price movement from point 1 to point 2, in the first pattern, and compare it to the price movement from point 4 to 5, in the first pattern, you will find that the movement from point 4 to 5 is at least 7.6 times larger.

Currently the movement from 4 to the $49 in April of 2011 is only about 1.65 times larger than the movement from point 1 to 2. If it follows the first pattern, and grows at least 7.6 times larger, it will comfortably pass $140.

For more analysis of silver and gold, consider subscribing to my premium service.

Hubert Moolman

“And it shall come to pass, that whosoever shall call on the name of the Lord shall be saved”

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 precious metal products, 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.

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