Silver prices hit a low of about $14.33 on July 24 after High Frequency Traders had run stops that week. It has happened before and will again. Occasionally they will run stops going up, not down. The gold to silver ratio has been hovering around 75.
That ratio has a long history of volatility. The ratio is high when silver prices are low and as silver prices push higher, the ratio drops. Note the graph of the gold to silver ratio using weekly data for ten years.
The red line shows the ratio, currently second highest in 12 years. The purple lines show trend line support for the ratio, which when broken, indicate a new move upward in silver prices. The black line shows silver prices.
Perhaps more useful is the same data but plotted as the silver to gold ratio. The ratio and the price of silver correlate well. Purple lines indicate trend line resistance. The dashed green arrow is my estimate of future price direction for silver.
Note the following graph of weekly silver prices on a log scale.
There are many other conditions that point to higher silver prices in the next several years, but the most important are:
Debt will be paid or liquidated. It can be paid with newly “printed” money, or it can be defaulted. I fully expect central banks to paper over defaults with more “printed” money. Either way, expect more QE, devalued fiat currencies, and higher prices for real money – silver and gold.
Courtesy: Gary Christenson
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