Silver – Three months ago on August 8, 2016, I wrote an article titled “Gold to Thrive in a Fiat Ponzi with Negative Yield” in which I presented the following charts and said:
“Why would you want to own yen or euros with negative yield, when you can own gold? – the real money. As an added bonus, there is no quantitative easing (QE) with gold.
It took gold approximately 7 months to advance $250 and overcome major resistance at $1,300/oz from a bottom of $1,050. A reasonable target could be $1,550/oz ($1,300 + $250) by March 2017 – 7 months from now. Silver could follow a similar pattern with a near-term target of $26/oz.”As Hedge Funds Dive Into Private Equity, Tiger Global Leads The Way
Assets in private equity and venture capital strategies have seen significant growth in recent years. In comparison, assets in the hedge fund industry have experienced slowing growth rates. Q2 2021 hedge fund letters, conferences and more Over the six years to the end of 2020, hedge fund assets increased at a compound annual growth rate Read More
chart from August 8 article
chart from August 8 article
August turned out to be a short-term peak for silver. Silver staged a multi-year break out in July and is currently resting on the 5-year support trend line of $18. This is not unexpected given it had run up 50% to a high of $21 from January low of $14, while the Comex speculative long and commercial short positions were at an unprecedented extreme, some of the excess optimism had since then been worked off.
Looking ahead, I offer you the following 2, 5, 15, and 100-year silver charts and conclude the article with my near term silver price target.
The 2-year chart shows silver broke out of the 2 year resistance level of $17.5 to reach $21 in July, and has fallen back to $17.5 which is now the new support level that also happens to be the 200-day moving average (200 DMA). It’s highly unlikely for silver to fall below $17.5, with $21 as the next target level.
The 5-year chart shows the important trend lines of $18 and $26. Silver needs to stay above $18 to confirm the breakout, with the next major target level of $26.
The 15-year chart clearly shows that in early 2016 the metal broke out of 5-year consolidation that started in 2011, and is now embarking on a new phase that appears to be a major bull run. The metal subsequently broke out of a major multi-year resistance level of $19 in July 2016 and should stay above $19 to confirm the uptrend.
This 100-year chart shows the metal is now testing the important 2-decade resistance level of $20. Once overcome, the next target levels are $25 (4 star), $30 (5 star), and $35 (6 star). If history is any guide, those target levels can be reached within months after the metal definitively breaks out of the $20 level.
To quote again from my August 8 article,
“In the unlikely event that the global economy miraculously recovers and the Fed quadruples the Federal Funds rate from the current, miniscule 0.5% to say, a tiny 2% in short order, dividend stocks would crater, and US bond prices would crash with hoards of speculative liquidity and baby-boomer savings looking for a safe haven – not exactly the recipe for a gold bear market.”
Either way (hike or no hike), there is no place for the gold (and silver) bull to hide.
Technically, the bull is intact and within 10% from assaulting the all important $20-$21 target level, it needs to stay above the 200 DMA of $17.5 and let the rising 200 DMA carry the metal over the magic $21 hurdle. My target (set in the August 8 2016 article) of $26 by March 2017 remains a distinct possibility. I will update you when this moment happens, in the meanwhile sit tight and enjoy the ride.
I own physical silver and chair Prophecy Development Corp. (TSX: PCY) which is developing Pulacayo mining project with over 20 million oz of indicated silver resource. I own 22.75% of Prophecy.
All currencies are expressed in US dollars.
John Lee, CFA is an accredited investor with over 2 decades of investing experience in metals and mining equities. Mr. Lee joined Prophecy Development Corp (www.prophecydev.com) in 2009 as the Company’s Chairman. Under John Lee’s leadership, Prophecy raised over $100 million through the Toronto Stock Exchange and acquired a portfolio of silver assets in Bolivia, coal assets in Mongolia, and a Titanium project in Canada. John Lee is a Rice University graduate with degrees in economics and engineering.