Arcs, measures and US dollar
First observation: There is potential for continued “measured price movements” in gold and silver. We have seen near perfect price gains over the past 8+ months associated with these measured movements. For gold, the measured movement is approximately USD 263.20. For silver, a similar movement was approximately 5.40 USD.
Both gold and silver have risen above their projected measured move lately, with gold at $1.945 and silver at $27.50. The sharp breakout of gold and silver has pushed prices well above these levels into extreme overbought levels. This big move in metals was also driven by the depreciation of the US dollar. When the US dollar falls, metals tend to rise.
Additionally, the depreciation of the US dollar was partly due to uncertainty due to the geopolitical situation and political events in the US over the past few weeks. The US government largely determines the mood around the world in terms of the policies of Congress, the Federal Reserve and capital controls. Uncertainty surrounding future expectations could cause the US dollar and metals to move sharply.
We also want to pay attention to the Fibonacci arcs in the following charts of gold and silver (arcs and circles). Current price movements may indicate that these upward measured movements in gold and silver are targeting Fibonacci price amplitude arc levels associated with price range expansion. The gold chart below shows how the price of gold moved first to and then through each subsequent Fibonacci price amplitude level. The last one was the 2.0x Fibonacci arc.
We believe gold will begin another measured move higher, likely in correlation with the weaker US dollar, which will target the next level of $2,160. When this level is reached, there will be a short pause in price, then another upward move will begin, targeting $2,400. This upward move is likely to occur before the end of January 2021.
Silver has also gone through a series of measured price movements that correlate with Fibonacci price amplitude arcs. The current measured movement level, around 27.50 USD, was reached on August 6, 2020. In fact, silver rose to a peak of $29.91 the next day before peaking, forming a pullback to close at $27.54 (almost exactly our measured move level).
When we add Fibonacci price amplitude arc analysis to these measured moves, we conclude that support near $27.50 should encourage another move higher targeting the $32.50 level. In addition, targets near $37.50 and $42.50 are clearly visible. Of course, short periods of congestion will occur during these upward measured movements. Therefore, you need to pay attention to the price reaction near these target levels. In addition, any weakening of the US dollar should be monitored, as it will be associated with the speed and volatility of the upward movements of gold and silver.
Forecasts for the relationship between gold and silver prices
The chart below shows the peak in the gold to silver ratio around March 19, 2021. The formation of a downward Pennant/Flag like this could cause a large breakout in the extremely high gold/silver price ratio.
The gold to silver ratio has recently moved from peak levels of close to 125 to 73.1. This collapse is a result of the incredible rise in silver prices recently. Historically, the gold to silver price ratio should be targeting levels around 55 (or lower) as silver rises to comparable price levels to gold. In 2010-2011, the gold to silver ratio fell to around 31. This happened when gold rose to almost $2,000 and silver to almost $50. Gold is currently trading just below the $2,000 level and silver is trading around $27.50. This suggests silver still has room to rise to $24+ if uncertainty expectations are similar to 2010-2011.
If gold rises to USD 2,400 or higher, it will be a sign that silver may rise above USD 60 per ounce and gold will continue to move near all-time highs. That is, this upward movement may continue as we approach the presidential elections and during the transition movement after them.
From a traders' point of view, the bullish trend and formation of downward price movements against the backdrop of the US presidential elections in November 2021 could provide an excellent opportunity to make money if you know how to calculate these movements and protect yourself from risks. Right now this market is providing fantastic opportunities for experienced technical traders. This is just the beginning. Be careful and avoid unnecessary risks.
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Theodore Butler on the Long-Term Prospects for Silver
Given the enormous financial chaos reigning in the world and the price instability going through the roof, it is difficult to think about the long term. The only problem here is that our lives are still measured in long terms. From a financial perspective, starting a family, raising and educating children, preparing for retirement and preserving your hard-earned savings are not just one-day problems; they force us to look to the future. Attempts to plan and predict the future do not make us clairvoyant and do not guarantee that everything will be as we expect. All we can do is speculate based on what we know now, and then try to prepare ourselves for what might happen.
Imagine that you are going on a trip for ten years and will be out of reach for the entire time. If short-term trading is not an option, what assets would you invest in before you return? Silver is an asset that can offer exciting returns and preserve capital with low risk. It is a vital resource and a basic industrial material, as well as a precious metal. And we have almost complete confidence that silver will rise significantly over time because so few investors are familiar with its reality.
There are limits to the future supply of silver. Every metal in the world is becoming more expensive to produce every year. This is due to the rising cost of production and the depletion of ores, since the largest and cheapest deposits have already been found and developed. The metal content per ton of ore in the Comstock Lode 150 years ago was hundreds of times higher than in deposits being discovered today. It takes more money and effort to get the metal out of the ground, not to mention the environmental constraints.
The world population currently stands at seven billion. Over the next ten years they will add another 750 million, or perhaps even a billion people, plus within twenty years. This is the equivalent of six of the current population of the United States, and all this will likely be accompanied by rising living standards around the world. One indicator of its growth is the increased use of electrical appliances and electronic devices of all types, from televisions, refrigerators, washing machines to computers and cell phones. Since silver is the best conductor of electricity, it is sure to be in high demand. In addition, silver has other important attributes. It is the best light reflector and coolant, and also has important biocidal properties - all this makes it indispensable for modern life.
Silver has performed better than any other asset over the past decade. But don't buy silver because of its past good performance - buy it for its bright new prospects. Ten years ago there was no net investment in silver. Only in the last five years has the world begun to invest in it. During this time, over 600 million ounces of silver were purchased into ETFs, with hundreds of millions of additional ounces of silver purchased in the form of coins and bars. Five years is a very short period of time for the international investment movement. On a per capita basis, the world bought only one tenth of an ounce of silver per person. It's safe to say that the global silver investing movement is in its infancy.
There is more investment capital available today than ever before. Capital today is more concentrated than ever between banks, large investment pools and hedge funds. We are talking about many trillions of dollars. All silver bullion in the world is worth less than $35 billion. Despite silver's excellent performance over the last 5 and 10 years, it has yet to attract investment from these huge concentrated pools of capital. It's only a matter of time before the really big guys wake up and enter metal. Considering how little silver there is to accommodate them, the impact of all this on the price will be explosive.
A factor that did not exist ten years ago is growing concern about the government debt situation. For the first time in living memory, the sovereign debts of developed countries began to be questioned and shunned. This problem cannot be solved easily and will not go away. It is not difficult to imagine the growing distrust of paper. Distrust of paper is distrust of someone's promise to pay. The only way to salvation is to switch to assets that do not depend on other people’s promises or solvency. Silver is the best example of such an asset. The bonus with silver is that even without any shirking from paper assets, it will still feel great.
The growing mistrust of European sovereign debt comes at the same time as a peak in money deposits in government securities and insured bank accounts. Given volatility in stock markets, a troubled real estate market and a broader economic crisis, people are voting for safety despite historically low deposit returns. Investors are flooding banks with deposits that yield little or no returns. Money is piling up on the sidelines like never before. Over time, they will begin to seek better investment returns than the near zero currently offered on insured deposits. Silver will attract some of this money. Either we come out of this economic mess and all the money now flooding the banks will increase industrial demand for silver, or we will fall into even greater mistrust of paper, causing panic buying of silver. Either way, it's hard to see how silver could be a bad investment.
The outlook for silver looks better than ever. There are major regulatory changes coming that will have a big impact on prices. It will also conclude the ongoing investigation into wrongdoing in the silver market by the Futures Trading Commission (CFTC). Attempts to suppress the price of silver are many times more clear today than they were ten years ago, and there are far fewer counterarguments to explain them. Take advantage of the current low prices to establish a long-term position in silver, and I doubt you will regret it. As worrying as today's financial situation may seem, it is actually quite positive for silver.
The reason for the recent price declines is a group of 20 large banks on the COMEX exchange, including JPMorgan, which are known for unexpected price collapses, usually in the middle of the night or during other lightly active trading times. They know that in this way they can force someone to sell out of fear, and push others away from planned purchases. They then wait for the right moment to buy what others have sold out of fear. I call it financial terrorism because it creates fear among investors. Proof of this is government statistics showing that these players always make large purchases during sharp drops in silver prices. Some might call it luck. I call this manipulation and financial terrorism.
The irony here is that most silver and gold investors originally bought precious metals as a hedge against exactly the kind of financial crisis we are experiencing now. In other words, gold and silver prices should soar based on current conditions. Instead, the manipulation is so strong that corrupt banks on the COMEX were able to convince the market that a run on paper assets was bad for precious metals. This is ridiculous and you should not be fooled by their manipulative games. The proof of all this is that these scammers buy by the handful during fake sales. You should do the same. These fake price drops provide great buying opportunities. Artificially suppressed prices mean that you are able to buy for much less than would be possible in a free market. The situation has to change and when it does, it will be like firing a slingshot in the other direction. The situation is more positive than we can fully understand.
