Tuesday, March 20, 2012

A Massive Spike In The Price of Silver Is Imminent

Gold and silver are very close to entering the mania phase of this bull market. In order for gold and silver to go into the mania phase, value has to be diverted from somewhere, and that “somewhere” is most likely stocks. Since 2000, there has been a correction in stock values, in real terms; however, nominally, stocks are still significantly high (close to its all-time highs).
I expect that significant value will soon be diverted from the general stock market, to silver and gold, causing prices to rally significantly, until these metals also become overvalued.
This is exactly what happened in 2007/2008. Below is a graphic (charts from barchart.com) that illustrates how this happened in 2007/2008:
The top chart is for the S&P 500 and the bottom is for silver. I have drawn a yellow line, at the point where the S&P 500 peaked. It is only after the peak in the S&P 500 that silver broke out, and eventually rallied significantly (while the S&P 500 was crashing). From a “fractal” point of view, we are currently in a similar position, with stocks getting ready to peak.

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