Spectacular bull markets in silver are not a fantasy and are not anomalies. In the last 35 years, silver has had a perfect record of strong bull markets after a bear market. A 350% gain is what can be expected once silver finds a bottom. Here’s why.
So says Ivan Y. of Prudent Finances in an article* posted on SeekingAlpha.com under the title Silver Can Triple Once It Finds A Bottom. The copy below consists of edited excerpts from said article which can be read in its entirety HERE.
Ivan goes on to say:
Does that sound ridiculous? It’s not if you look at what has happened in the past. In the past 35 years, silver has experienced five major bull markets that have averaged a gain of 350% off the lows. The bull markets lasted anywhere from several months to seven years. There were actually 6 bull markets, but I did not include the run-up to nearly $50 that occurred in 1979-1980. Though it may have been a legitimate bull market, much of the gains that came during that cycle were probably artificial due to the attempt by the Hunt Brothers and their partners in trying to corner the silver market.
- June 1982 to March 1983 ($4.89 to $14.72, +301%)
- May 1986 to April 1987 ($4.85 to $9.14, +188%)
- March 1993 to February 1998 ($3.56 to $7.28, +205%)
- November 2001 to October 2008 ($4.03 to $20.78, +515%)
- October 2008 to April 2011 ($8.79 to $48.6, +553%)
In order to jump-start the next bull market, I think there are probably 3 things that need to happen.
- We need to get the first rate hike by the Fed out of the way...
- Historically gold has struggled before the first rate hike by the Fed, but performed strongly after the first rate hike occurred.
- Silver’s price movements have not always correlated with gold, but for the most part they move in the same direction.
- The sooner the Fed raises rates, the better it will be for silver.
- We need to see either a pickup in inflation or at least a perception by the public that there will be higher inflation.
- It was the anticipated rise in inflation as a result of QE1 and QE2 during the 2008-2011 bull market that served as the catalyst that lifted silver to nearly $50. According to the government-reported CPI, there is little or no inflation at all in the United States.
- In order to see a pickup in inflation, the velocity of money needs to increase. That means that money needs to change hands quicker. This is where I think a rate hike by the Fed might help. Banks are currently reluctant to lend money. That is partly due to low rates and partly because they have gotten more conservative as a result of the mortgage crisis several years ago. Higher rates should provide an incentive for banks to do some more lending. This could spur a pickup in consumer purchases and business activity which could increase the rate of the exchanging of money. Due to fractional-reserve banking, bank lending also has a multiplying effect on the amount of money in the system.
- The best case scenario that will really jump-start the next silver bull market is if the Fed begins another round of QE. That would be QE4.
- One scenario that could lead to this is if the Fed raises rates once or twice in the next several months and the financial markets, including the U.S. housing market, respond negatively and the dollar rises too high hurting the profits of U.S. multi-nationals and triggering problems in emerging markets. Higher rates will also exacerbate the debt situations in Puerto Rico and other candidates for bankruptcy like Chicago.
- It would take a lot of bad news for the Fed to initiate QE4. I do not think QE4 will happen anytime soon, but nevertheless, it should not be ignored as a possibility going forward.
I do expect that silver will have another superb bull market, perhaps as much as 350%, but I think the starting point probably has to come at lower levels. It’s easier to triple starting at $10 than it is to do it at today’s price of around $15. I just picked $10 because it’s a nice round number, so please don’t assume that I think silver will bottom at $10.
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