By John Reizner |
The silver market appears to have broken upward through important resistance at $15 per ounce on the weekly and monthly charts, closing at $15.73 per troy ounce for the trading month of May 2009. On both charts, it appears silver could reach as high as the $17-$20 range, with a potential blow-off top potentially reaching the old 1980 high range at $32-$42 per ounce. This may occur in the next one to two years, perhaps much sooner.
The use of price charts and similar analysis has key limitations, and no one can predict with accuracy short-term price movements. Nonetheless, the possibilities here are interesting.
Selected monthly silver futures rose over 2000% from $2 per troy ounce in 1973 to over $40 in 1980 as the Hunt brothers tried to corner the silver market at that time. We may see the silver market rise from $4 at its recent low in 2001, to up to one half that 1970's twentyfold percentage increase, to as high as $32 -$40 per troy ounce in the next year or two, or much sooner. This silver bull market might be of similar duration as the 1970's bull market, lasting from 2001 to 2009-2010.
It may be important that the silver price has closed near its high for the month of May on the monthly chart at $15.73. This has occurred as the silver price has broken through monthly chart resistance at the $15 level. As I have said, there appears to be little immediate resistance until the $17-$20 range. We may continue this upside push as the action on the monthly chart appears to show.
This portrait of the silver market concurs with my previous reiteration of the gold market dynamics (see related articles below), where I state that we may now be in the final upward acceleration phase of the gold market. In gold's earlier long term bull market lasting nine years, the gold price rose from $35 to $850 per ounce between 1971- 1980.
In the last two years of that gold bull move (1978-1980), gold multiplied from $200 to $850 per ounce in an explosive fourfold move. Silver traded at a reaction low of approximately $8 in October 2008. A fourfold increase in silver from that low might produce a potential bull market top in the $32 per troy ounce range in the near future.
Some fundamental economic and financial market factors may also be supporting the bullish push in silver. The U.S. dollar is declining sharply as I have written about repeatedly in my blog and articles. If the dollar continues downward as I expect, silver may increase in value as a harder money investment.
The Swiss franc, a traditional hard money currency, is nearing the top of an extended flag pattern on the weekly and monthly charts. A breakout here could potentially drive that currency much higher. The metals could also move upward further in this scenario.
Also, Bernanke's monetary ease may not be able to be easily reversed, perhaps adding further impetus to the metals complex and to the potential profitability of inflation hedges in general.
I have sold my remaining position in the Templeton Global Bond Fund while still holding my shares of the Franklin Templeton Hard Currency Fund. I have purchased silver bullion in the past week and continue to hold gold. I am looking for a bubble in the gold and silver markets to unload partial or full positions.