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Silver is Still Cheap Relative to Gold, Trend Forecast Update

Commodities / Gold & Silver 2019 Sep 01, 2019 - 08:01 AM GMT

By: Nadeem_Walayat

Commodities

This is part 2/2 of my Silver Price 2019 trend forecast update - Part1 - Silver Price Tragets for 2019 - Forecast Update

So the Silver big question for 2019 is will the price be capped at resistance at $21 or like the Gold price breakout of its 5 year trading range to target the next resistance area of $25.

Silver is Still Cheap Relative to Gold

6 weeks ago ago the Gold / Silver ratio was trading at an historic extreme of 90.31, at a level not seen for over 25 years! In comparison to the historic average of 50 which on the then Gold price of $1330 would have had the Silver price trading at $26.60. Which illustrated how much of a coiled spring Silver tends to be as it has tendency to swing sharply higher rather than track the Gold price trend.


The recent surge higher in the Silver price has seen the ratio retreat from an extreme of 95.11, when Silver was a SCREAMING BUY to currently stand at 87.01. Which is still CHEAP! Whilst we can dream of Silver reaching it's long-term average of 50 which on today's Gold price would suggest $28.6! However a more realistic, achievable target for this year would be a move to between 80 and 82. That would suggest a Silver price of $17.70 on the current gold price, which puts the current price of $16.56 at a significant discount.

Trend Analysis

This chart illustrates that the Silver price has a lot of resistance levels to overcome before we start dreaming of the likes of $25 and beyond. Which therefore suggests to expect a volatile trend, sharp swings higher and lower as the Silver price traverses through a series of resistance levels.

The Silver price is currently correcting from resistance at $16.70, which in the immediate future could see Silver trade down to $16, and perhaps a little lower in preparations for the next assault higher, which is being confirmed by the overbought state of the MACD. So a correction to around $16 is likely.

Inflation Mega-trend QE4EVER Reminder

Briefly a recap of one of the key Mega-trend driver of our age. that of central bank exponential money printing where QE is the current method for the debasement of currency through monetization of government debt, and as I stated 10 years ago ! Once QE starts it NEVER stops! And we only need look at the US debt mountain that has grown from $19 trillion to $22 trillion under Trump, despite his election promises of going to bring the US budget deficit down 'bigly' and cut US national debt under his delirium inducing presidency.

  • In his official campaign launch address, Trump promised to “reduce our $18 trillion in debt,”
  • On the campaign trail, Trump said he would “freeze the budget,".
  • Shortly before his inauguration, he told Fox News that he would “balance the budget very quickly… I think over a five-year period. And I don’t know, maybe I could even surprise you.”
  • In March 2016, he told Bob Woodward that he could get rid of the debt “fairly quickly.”
  • Trump asserted during the second presidential debate that he would bring back energy companies, which would make so much money that they could pay off the national debt.

None of which will come as a surprise to my readers for even though I expected Trump to win in 2016, nevertheless I repeatedly stated since before Trump took office that he is basically a CON MAN. And so it remains to be seen if he can con his way into the White house by means of collective delirium for a 2nd term.

So yes QE is currently on pause, but once it starts it never stops so likely to resume ahead of the next recession which is why investors need to leverage themselves to the inflation mega-trend by investing in assets that cannot be easily printed, that's housing, certain stocks and yes precious metals.

The Inflation Mega-trend EbookThough personally I favour the first two far more than precious metals i.e. less than 3% of my portfolio is in precious metals. For instance 10 years ago when I wrote my Inflation Mega-trend ebook in Jan 2010 (The Inflation Mega-trend Ebook - Jan 2010), I focused on a series of big cap stocks to capitalise on the Inflation Mega-trend, at the time Google was trading at about $400, today Google is trading at over $1200! Which illustrates what it means to leverage oneself to the Inflation Mega-trend and AI mega-trend, all without the risks of gambling on small and medium cap stocks that could soar or go bust!

And all we are going to see over the next 10 years is a continuation of the exponential inflation mega-trend. Add the AI exponential mega trend, then you can well understand why I keep banging on about investing in AI stocks as they are leveraged to two mega-trends! This is why I don't get phased by stock market drops, crashes, even bear markets for I understand they are BUYING OPPORTUNITIES!

Silver Price Trend Forecast

The Silver price continues to target my 2 primary resistance targets for 2019 of $19 and $21. Once we reach and break those levels then we will know what to expect beyond $21. With the following graph illustrating the expected central trend trajectory for the Silver price, baring in mind it is a volatile commodity.

And taking my Gold price forecast into account of at least $1570 by early October and likely $1630 then on an achievable gold / silver ratio of 81, the Silver price could be trading at between $19.40 to $20.15 by that time. Which would represent a gain of 17% to 22% on the current Silver price.

So Silver remains as a volatile coiled spring primed to blast off into the stratosphere, where we got a taste of what to expect with it's recent surge higher, where my long-term MINIMUM objective is $35, representing a 111% gain on the CURRENT silver price, far beyond the 25% my Gold long-term $1800 target presents.

So, don't get carried away with trying trade or to time entries because whilst your waiting for that extra 20 or 30 cents before buying, Silver could just as well decide to rocket higher to the next resistance level. Instead INVEST in Silver, accumulate when cheap and given the gold / silver ratio of 87, silver today is still cheap.

The bottom line is that the higher Gold and Silver price go, the more investors will be waking up to precious metals being a means of leveraging themselves to the Inflation Mega-trend and jumping on board, hence expect a series of spikes higher through resistance levels.

Disclaimer, I am invested in Silver (SLV)

This analysis was first been made available to Patrons who support my work. Silver Investing Trend Analysis and Price Forecasts 2019 Update

So for immediate first access to ALL of my analysis and trend forecasts then do consider becoming a Patron by supporting my work for just $3 per month. https://www.patreon.com/Nadeem_Walayat.

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Disclaimer, I am invested in Silver (SLV)

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Your mega-trends investing analyst

Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-2019 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 30 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

Housing Markets Forecast 2014-2018The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

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 trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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