I wrote a piece yesterday showing you how the moving averages for both the HUI and gold look to be bottoming and crossing over from very oversold levels. I got to thinking, what about silver? I figured in the back of my mind that because silver has underperformed gold and has generally seemed to only “bottom bounce” more that its progress was behind that of gold.
I again tapped my buddy Dan Norcini and asked him what silver looked like? This is what he sent me!
Silver is exactly where it should be given that historically the shares lead, followed by silver and then gold. Silver’s MACD’s are not “touching” yet but they are VERY close, much closer than gold’s to crossing over. I do want to point out that we have “round tripped” back to the $18-$20 levels that was seen in previous years as resistance. We basically hit this resistance level 3 times prior to the 2011 run up. Once broken out however, silver ran to $30 in 6 or 7 months.
Also please keep in mind that we did not have nearly as much “stored up energy” as a springboard then that we do currently. The big drop at the end of 2008 had been largely corrected and the move up back then was NOT from an oversold extreme…like we have today!
I have seen in the last week or so that many “bears” are talking the move down and telling us it’s a “bull trap” and “new lows” are just around the corner. I just don’t see it from any angle. I don’t see it in the charts, I don’t see it fundamentally as miners cannot collectively make a profit from the current prices, I don’t see any froth at all (in fact the negativity is as deep as I’ve ever seen it), I don’t see it with the outsized global demand nor with refiners working 24/7 to meet the demand. I just cannot see it.
What I do see is that the HUI, followed by silver and then gold are lined up exactly as one would expect if a major generational turn was in progress. I would also expect that from here you will see moonshots in many miners and that silver will grossly outperform gold. Were gold to get back to the old high, it is only about a 50% move, for silver it’s 150%! The “old highs” in my opinion will only be a stepping stone as to where these ultimately move to…a laughably low stone.
Am I putting my “credibility” on the line by saying what I have? If I’m wrong are you being “duped” into being all in or as “all in” as you’d ever get? Let me put it this way; I am “all in” and have been for years. 2008 was a killer in the shares (just like the last year) but they came back as I expect they will now. If it were not for owning physical metal as a foundation it would have been psychologically much harder. Silver went from $24 down to $9 back then, is there any difference in going from $50 to $20? No it is exactly the same…but from $9 it went to $50 in three years which would be like going to $100 from here. Can’t happen? It did just 5 years ago…from a lesser oversold level and with fundamentals not quite as tight as they are now….and it only took 7 months to do it!
Before finishing I’d like to put “credibility” in perspective. Some of you know Larry Edelson, some of you don’t. He is a “timer” and has been bearish gold since it broke $1,650 last year…and correct so far…sort of. He has not reentered and in fact is warning people that we are currently in a “suckers rally” to use his words. He says you must wait until $1,080 or even $980 before buying…and then it’s off to the races as in a $5,000 gold price. I would say what’s the difference? Yes you will have more ounces but what are the risks? The “risks” as in what if he’s wrong and we do barrel upward from here without ever looking back…? What if gold and silver go into hiding because of some geopolitical or financial event…and you can’t get ANY? To answer the question “what’s the risk?” the answer is your financial survival that’s what! To be as wildly bullish long term yet try to nit-pick and call exact bottom doesn’t make any sense at all to me because if he’s correct you will win just as if you bought today…but if he is wrong YOU are dead with no chance of ever recovering. How credible is that? This is a bet that if you are correct you live but if wrong you are dead, why even bring your potential death and destruction into the equation? Those are poor odds in my opinion.