Silver Mirrors Gold’s Decline but a Massive Rally will Follow

by John Galt
May 9, 2012 19:00 ET


If one is led to believe the usual nonsense on the Bubblevisions, gold, silver, and anything that is considered “real money” will be smoked in the weeks to come.


For once, this esteemed, or full of steamed clams, blogger agrees.


The markets are indicating the following for long term paper silver bulls (I emphasize PAPER SILVER BULLS)


1. Severe correction.


2. Deliberate price suppression for industrial purposes.


3. A move to prevent a delivery crisis from various exchanges which hold more paper than the metal.


The one year chart of silver indicates an almost identical breakdown for silver as it did gold and for purposes of this discussion I shall speak CNBSBBBGFBNese where I use the SLV ETF to highlight the move:



There are numerous technicians and market commentators who will disagree with the statement I made within the graph above, but reality is that for every action, aka, a three year bull market, there is an almost equal and more violent reaction. To get some perspective of the duration of this bull market, here is the three year chart which illustrates the massive bull move then rollover:



The intraday low below $15 per ounce to above $39 is more than a triple, however the compact nature of the rally, much like the late 1970’s, indicates a spike which was not sustainable in the intermediate term, but will result in a massive rally once support is established. The following chart highlights the support areas, with anything below $15 per ounce telling us that everyone should stock up on pencils and apples to sell on street corners should that much deflationary destruction occur:



If the initial area of support holds, it is my contention that this move could easily take the price of silver to over $100 might seem like a weak prediction, but based on the amount of liquidity that will be needed to save the current financial system, it is a very conservative estimate in my opinion. If one takes a moment to reflect on the 2008 time period, which was the last truly great buying opportunity, the chart shows the last “Death Cross” and the intraday low which led to a price spike of over 5 times the lowest level from that time period until this year:



With a move of $9.50 to $49.50 it is a no-brainer to buy this upcoming dip.


Or better yet, sell to me at the lows.


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