Potential routes for Silver price in upcoming PM bull run (2)
Updated
I am not going to go in detail in this analysis.
First route is based on 2008 bull market in silver.
Second route is based on the bull market in late 70s.
I think a bullish phase similar to late 1970s makes the most sense. You can check out my analysis on Gold to see why.
Note
Do your own DD. Not financial advice.Note
This is a speculative setup. It is based on FIB levels by comparing to the two last bull phases. I don't expect the price to follow these paths accurately. I only made it to get an idea of what another bull run could potentially look like. Why I think it is possible for silver to have a parabolic run, is not based on technical analysis of the silver chart, but rather it is based on fundamental factors and technical analysis of Gold chart. I think it is way more opportunity in silver than in Gold, so I am mainly positioned in silver and silver miners. It is more risky, but still, I believe the risk/reward ratio is incredibly good. Gold price will probably steer the way, but it will be outperformed by silver by A LOT when it gains momentum.
There are two types of main contributing factors for bull markets in silver. The first one is fundamental based - where it goes from being undervalued to overvalued, relative to monetary and industrial demand. The second one is a short squeeze. The bull market in the 70s was a combination of both, and that is what I think will happen again.
The fundamental factors that will drive the gold price up will also be good for silver. You can read some of the most important ones in the gold idea linked above.
Note
Silver also has some additional fundamental factors and correlations that I believe will contribute to even more upward pressure on the price:* More of an industrial metal than Gold.
- Industrial demand is growing rapidly, and will continue to do so, especially if the focus on "green energy" continues increasing (which is very likely). EV and solar panel production is one of the big consumers of silver.
* Silver is not only severely undervalued as an industrial metal and relative to monetary demand, but is also undervalued against other commodities and other PMs (most important one is gold/silver ratio).
* Supply shortage.
- There is reports of supply shortages for silver. Silver reserves and silver production has gone down over recent years. Combine this with the extremely rapid growth in demand lately, and we have a perfect storm for silver price to skyrocket. The price of physical silver keeps climbing, while the spot price stays still. The paper price can't ignore the real price for much longer. The Comex inventories are starting to decline at a rapid pace. Comex has reported deliveries the last couple of months that are 4x compared to the same month in previous years. Physical silver shops are not able to keep up with demand. The uk shop Royal mint, recently reported a 540% increase in silver bar sales in march-april this year.
Note
* Has been heavily manipulated, and there is a lot of institutional short sellers. This can not continue for ever, and soon, the increased demand, that has been a result of strong fundamental factors, will make it too hard for the shorts to keeping the price low. They will have to start covering their shorts at some point, which will make the price go absolutely parabolic. * Small market cap.
Silver market cap is currently a little more than 1.5 trillion USD. This means it takes less to impact the price movement.
* Correlations to other assets and economic indicators and measurements all suggest that silver is incredibly undervalued.
- In the peak of the bullrun, in 1980, silver accounted for more than 0.25% of global wealth. In 2019 it was almost 0.01%. Yes, the price of silver has increased since 2019, but it still has a lot of room to grow. The monetary supply is also increasing at record pace, which will only give silver more room to grow.
- Silver compared to virtually any other asset class is showing silver near record lows.
Try to type in SILVER/DJI or DJI/SILVER in trading view chart browser.
If we were to reach 2011 high in silver (peak of last bull run) measured in shares of the Dow Jones industrial average, silver would outperform the index approximately 500%.
Since the fundamentals for silver is better now than they were in the bull market that ended in 2011, I expect us to reach higher levels than this.
If we were to reach 1980 high in silver (peak of the 70s bull run) measured in shares of the Dow Jones Industrial Average, silver would outperform the index by approximately 6000%. I dont think this is likely, unless the Dow Jones somehow loses most of its value simultaneously as Silver goes to the moon and beyond, BUT, correlations like these show us that silver is an incredibly undervalued asset, which gives us an amazing opportunity.
The only way a silver price at current levels could be justified, would be if it had lost all of its utility as an industrial metal, lacked scarcity, lacked its history as sound money with intrinsic value, and only existed as part of peoples coin collections. But none of those are true. It will not be this cheap for much longer. I just dont see how that would be possible. I dont think there is any other trade setup with anywhere close to this risk/reward ratio at the moment. Sure, it is probably possible that the market makers can continue manipulate the price for a little longer, but with the current fundamental factors it will not be easy for them, and it will be impossible to do it in the long run. Even though it is possible we can get a better entry for silver soon, is it really worth trying to wait for another dip, that potentially might not even happen, and miss out on an upwards potential that is of a dramatically significant magnitude higher than the potential losses?.. Silver will never go to zero, and is historically undervalued right now, so what are you waiting for?
Note
NOT FINANCIAL ADVICE OF COURSE. I just like this metal because its shiny.Note
Also, the potential routes for the silver price movement that I have drawn are just done for fun, and as stated above, I dont expect the price movement to follow it accurately. Silver is very manipulated, so I am not going to pretend that I can predict medium and long paths accurately. It is just to give you an idea of how it is possible for Silver to move. For accurate price movement in Silver I usually analyze gold, and then try to figure out how that would affect silver price.
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