Silver May Be Overextended - But It's STILL Cheap / Commodities / Gold & Silver 2020
Silverpricesaren’t just rising; they’re erupting!
Silver has been ascendingat a far steeper rate than the climactic move of 2010-2011 which brieflybrought prices back up to all-time nominal highs.
Adding a 20-week rate ofchange (ROC) indicator to the silver futures chart below shows prices gaining122.4% over that period – far exceeding the rate of ascent of the last bigsilver spike.
After years of beingsuppressed below $20/oz, then being forced down to an absurd new low during thelockdown, extreme pressures built. Finally, silver erupted like a geyser.
Old Faithful at YellowstoneNational Park erupts according to a predictable cycle. As intense heat buildsfrom deep within the earth below, water is forced up in small bursts at first –warning signs that something bigger is about to occur. Intense pressure insidethe geyser causes steam to seek a more dramatic release valve in the form of aneruption.
As the boiling hot waterthat is ejected cools off, the eruption recedes, and the cycle repeats.
Silver cycles are longerand harder to predict, but they work in a similar way. At some point priceswill have to recede in order for buying pressure to build back up for anothersurge higher.
A sharp reversal in thesilver market is not only likely but healthy in the long run. Those who areholding silver for the long run need not be concerned.
In the big picture, thewhite metal remains relatively cheap even after its recent price eruption.
To match its 1980 high inreal terms, silver would have to top $160/oz. That figure is based on thegovernment’s own faulty CPI data and doesn’t account for additional currencydepreciation sure to come in the months and years ahead.
Another way to gauge justhow cheap silver is versus other asset classes available for investors is to compare it to the Nasdaq 100 ETF(QQQ).
When silver peaked in 2011,it had reached nearly a 1:1 ratio with QQQ. Today, an ounce of silver trades atabout one-tenth the price of a QQQ share.
Which offers better valueat these levels – silver bullion or trillion-dollar QQQ components Apple,Amazon, Microsoft, and Google?
That’s a question investorswill have to answer for themselves. But the fact remains that silver – whichhelps make smartphones and a host of other technologies possible – could go up9x versus tech stocks without entering uncharted territory.
Investors who are eying amulti-year silver bull run ahead should view any decent pullback from here as abuying opportunity.
Stefan Gleason isPresident of Money Metals Exchange, the national precious metals company named 2015"Dealer of the Year" in the United States by an independent globalratings group. A graduate of the University of Florida, Gleason is a seasonedbusiness leader, investor, political strategist, and grassroots activist.Gleason has frequently appeared on national television networks such as CNN, FoxNews,and CNBC, and his writings have appeared in hundreds of publications such asthe Wall Street Journal, Detroit News, Washington Times, and National Review.
© 2020 Stefan Gleason - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
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