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
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
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

Gold and Silver Price Forecasting Problem

Commodities / Gold and Silver 2015 Feb 02, 2015 - 11:29 AM GMT

By: Dr_Jeff_Lewis

Commodities “The problem is not that there are problems. The problem is expecting otherwise and thinking that having problems is a problem.”- Theodore Rubin

The media sensation surrounding various storms of the century has been astounding. Meteorological prediction is complex science to say the least. The fact that 24 hour forecasts have become almost 87% accurate over the years is a testament to modern science – and, in particular, chaos theory.



However, the ability to predict large and rare events like big storms, tornadoes, hurricanes, and blizzards, is extremely difficult because these storms ultimately manifest based on an array of very statistically small probabilities - too small for mathematical prediction and, therefore, reliable modeling. Of course, that never stops the media and its incessant need to churn attention and traffic.

This got me thinking about how to forecast asset prices or simply economic-financial outcomes with any sort of precision. Obviously, much sensation surrounds and fuels this phenomenon in every industry. We are not immune.   

Precious metals prices have been teetering on the edge of extreme fragility for years. In fact, it's been so long that we, as current observers, are almost completely insensitive to the basic conditions – or the conditions surrounding price discovery.

Even those of us who have taken the time to understand the who, how, and why of manipulation are not immune to the thrill of forecast and trading. This idea that price is connected to a sustainable reality is pervasive and rooted in our psychology. I believe it also leaves us severely vulnerable to surprise.

Sensitivity to Initial Conditions

Small variations in any system aggregate and amplify over time. This is part of the crux of systems and chaos theory.

It's where we get the overplayed euphemism, "When a butterfly flaps one wing in China, a hurricane is born off the coast of Africa...”

It gets even better than that.

In the book, "Chances Are...Adventures in Probability" by Michael and Ellen Kaplan, the authors point to the work of physicist David Ruelle, a chaos theory expert who demonstrated that:

"…suspending the gravitational effect on our atmosphere of one electron at the limit of the observable universe would take no more than two weeks to make a difference on the Earth's weather - equivalent to having rain rather than sun at a picnic".

One electron, one snowflake.

But tiny variables are unnecessary when it comes to financial systems - especially those systems that are controlled with aggression and longevity.

Take precious metals - particularly silver. Because its price discovery mechanism is so extremely corrupt, it is easy to imaging the eventual accident waiting to happen – along with the variety of scenarios that might serve as a trigger. (We discuss these almost constantly, though we cannot pinpoint the timing).

Apply this to supply and demand fundamentals and you have some semblance of price based on the fluctuations in reality; not necessarily easy to predict, but rational nonetheless.

We have a market (markets) long-divorced from any semblance of real fundamentals. And that makes the next significant move even less predictable – practically guaranteeing that it will detach far from expectations, completely catching observers off guard and very likely spilling over to tilt all markets, near and far.

Continuing along that line of thought…

It reminds me of the need to prepare that goes beyond silver. Silver can be the gateway for so many. Many are initially lured in by investment demand, and not necessarily in the spirit of preparedness, or economic-urban survival.

This phenomenon that the science of chance has uncovered is that of stochastic resonance, where small, often random variations in systems triggers much larger changes than otherwise thought.

Sometimes it can be an aid.

In one example, perhaps debunking the myth that focus or attention needs quiet conditions is that slight agitation or distraction can rekindle or improve focus. Maybe some students can actually study better with music on in the background.

But as you can imagine, stochastic resonance (little butterflies) in natural systems is very different from that contained in the fragile realm of artificial (financial) ones.

In the realm of currency and finance, we can see the snowflakes, butterflies, and the black swans everywhere. But they are massive waves produced by the constant threat of a invisible – though very real - storms in confidence.

When confidence shifts away from the dollar and the greater fiat basket of currencies, and the institutions that depend on it transcendence will occur beyond any concept of speed, or even time, as we know them.

For more articles like this, and/or for a breath of fresh silver market reality amidst the stench of denial and technically meaningless short term price obsessed madness, check out http://www.silver-coin-investor.com

By Dr. Jeff Lewis

    Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of Silver-Coin-Investor.com

    Copyright © 2015 Dr. Jeff Lewis- 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.

Dr. Jeff Lewis Archive

© 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