The Phaserl


Green Light Silver

by Gary Christenson, Deviant Investor:

Silver looks like it has bottomed and will move substantially higher. Why?

Long Term – 25+ years: Examine the silver to gold ratio since 1990. The ratio is currently low and appears to have bottomed. Silver bottoms when the ratio bottoms. Expect a multi-year rally.

Medium Term – 15+ years. The US national debt is huge, moving higher, and has effectively zero chance of stabilizing or decreasing in the next decade. A poorly built mobile home is more likely to survive a Category 5 Hurricane than the US national debt will decrease.

Examine the chart of national debt and silver prices for the past 15 years.  Silver prices will “catch up” with the drastic increase in national debt.

J-SI-Nat Debt

Silver prices erratically follow national debt higher.  Long term charts of debt versus silver since 1913 and 1971 (not shown) clearly demonstrate the same relationship.  Questions:

  1. Do you expect US national debt, global debt, and other sovereign debt will decrease without a massive debt default? I don’t – debt will increase.
  1. If the world continues on its current “borrow and spend” path, do you expect silver prices will reverse their 100 year correlation with debt, spending, and currency in circulation? I don’t – silver prices will increase substantially.
  1. But if the world economy collapses into a deflationary depression and $100 Trillion in global debt defaults, would you rather own physical silver, dodgy fiat currency, or paper debt?
  1. Or if the world economy collapses into a hyperinflationary disaster, would you rather own physical silver, increasingly worthless paper currency, or paper debt?

Multi-year Term:  Examine the graph of weekly silver prices.  Silver prices are low and have broken the long term descending resistance line.  The next targets are the upper horizontal band at about $19.15 and then about $35.

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2 comments to Green Light Silver

  • rich

    Hathaway expects gold flow from West to East to end in short squeeze

    While there doesn’t seem to be anything in it about direct intervention and trading in the gold market by central banks, Tocqueville Gold Fund manager John Hathaway’s third-quarter letter is compelling reading and cites developments called to your attention by GATA.

    Hathaway writes: “On a technical level, the well-documented shift of physical gold ownership from Western investment hands to Asian will in our opinion threaten the highly levered institutions that intermediate financial and physical gold markets. The intermediaries include Comex, LBMA, the over-the-counter market, and bullion banks. We expect the gold drain from West to East to be resolved by a short squeeze. Signs of stress that reflect a growing shortage of physical gold to support the paper market include the prolonged backwardation of the co-basis, which has existed now for 3 1/2 years and is approaching extremes last seen at the bottom of the gold market at year end 2008.”

    Hathaway’s letter is posted at the Tocqueville Internet site here:

  • chris

    Another chart with a pretty color arrow tipped dotted line pointing skyward. Must be real!

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