Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Silver And The Petrodollar

Commodities / Gold and Silver 2015 Aug 24, 2015 - 03:18 PM GMT

By: Hubert_Moolman

Commodities

Many have mistakenly dismissed silver as just another commodity like oil, for example. If one looks at how silver has traded since 2001, in comparison with oil, one might agree with that mistaken believe. Below is a comparison of silver and oil since 2001 (charts from stockcharts.com):


During the same periods, both goods traded higher or lower, together. For example, from 2001 to 2008, both silver and oil rose significantly. During those seven years, silver increased more than four times in value while oil rose more than seven times.

Based on the above chart-comparison, some might even argue that it is silver that is more overvalued than oil since it is trading at greater than triple its 2001 value, whereas oil is only trading at double its 2001 value.

Yes, they might have traded similarly since 2001, as well as during some other periods; however, they are at completely different points in their respective cycles. Oil is a true commodity, and it is ultimately subject to forces that rule over commodities, whereas silver is real money and likewise, subject to forces that rule over money.

We are currently at the end of an era of debt-based money, where the monetary importance of real money like silver has been supressed. Silver is about to move into that important role as true money, as more people will continue to search for a genuine store of value, due to the collapse of the current monetary order.

Oil is probably the most important commodity today, and is inescapably linked to the health of the world economy. It is also the key ingredient in the petrodollar system. Due to the huge debt burden, the world is in a massive deflationary period, which will get much worse over the next several years.

The oil price has already taken a huge hit, due to this slowdown in economic activity. However, it is not the end of this decline. Many events still have to occur before we see an end of this decline in oil the price – one of them being a complete crash of the Dow.

This decline in the oil price is a key component, that could lead to the end of the petrodollar system. The decline in the oil price will further put pressure on oil producing countries (part of the petrodollar system) to produce more oil to compensate for the lost revenue due to the lower price (see video by Mike Maloney), causing oil prices to drop further.

A long-term chart comparing oil and silver gives a more accurate view of their vastly different futures. Below is a long-term chart (from barcharts.com) comparing silver (green and red) and oil (green):

Again, on the surface one would think that both move in a similar fashion. For example, they both rose significantly during the 70s, peaked in 1980, and then had a long decline towards 1999 to 2001, from where they moved in a similar manner until today (as explained above).

However, when you look at those highs around 1980, then you will notice that whereas oil has significantly exceeded its 1980 high (since then), silver only reached it briefly. Even now, oil is above or at its 1980 high. Silver, on the other hand, is at less than a third of the value of its 1980 high.  So, which one is really overvalued?

This clearly points out that they are at two completely different points in their value cycle (just as the fundamental analysis above confirms). Silver will far exceed its 1980 high before this decade is over, while oil is very likely to go to extreme lows, before it is in another bull market. Believe it or not, from the look of that chart, I would say oil could eventually go lower than $10.

Using fractal analysis, I would say that oil is in a position similar to where silver was at the beginning of 1981- see point 1 on the silver chart, while silver is where oil was at the end of 2001 – see point 2 on the oil chart.

For more of this kind of analysis on silver and gold, you are welcome to subscribe to my premium service. I have also recently completed a Long-term Silver Fractal Analysis Report.

“And it shall come to pass, that whosoever shall call on the name of the Lord shall be saved”

Hubert

http://hubertmoolman.wordpress.com/

You can email any comments to hubert@hgmandassociates.co.za

© 2015 Copyright Hubert Moolman - 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.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in