The Biggest Silver Bull Market is About to Knock on the Door – Are You Ready?

(January 16, 2020 - Hubert Moolman)

Silver is undervalued when you look at the gold-to-silver ratio, which now stands at a staggering 1:86. As countries around the world make efforts to stimulate growth and manufacturing, the demand for silver could skyrocket.

We already reported how the recent crisis between the United States and Iran sent the price of gold to record heights. However, silver still hasn’t been properly following and is still below its record from September 2019.

Silver has been consolidating for several years and is therefore still below all-time highs of roughly $50 per ounce. However, there are some good reasons why we think this metal would explode past the $20 per ounce mark in 2020.

So, as we’ve been already mentioned, there was a strong rally in the price of gold. Therefore there is a spike in the gold-to-silver ratio as well. Now the ratio looks incredible – 1:86. That means you need 86 ounces of silver to buy only one ounce of gold.

In the previous history, whenever the ratio would spike, it was followed by a retracement back to usual levels. The usual level was 1:60 in the last 20 years.

We call the retracement a time-tested indicator that was seen back in the 20th century as well. For example, back in 1942, the ratio stood at 1:97 but quickly fell to 1:43 in 1946. In the year of love, 1968 it was incredible 1:18. That again means that when ratio, once again, retraces – the prices of silver are going up.

JP Morgan Facing Convictions

In the past, a lot of the banks and traditional financial institutions were been accused of manipulating the bullion markets. Since 2011, JP Morgan has literally hoarded 350 million ounces of silver – around 38% of the world production. That was pretty much more than the number they’ve officially reported – 50 million.

At the same time, the bank held the biggest short position on silver in the futures markets. During the last few years, many of JP Morgan’s top-level employees were charged with hoaxing the markets.

Some pleaded guilty as well, but the investigations are still on the role. Probably, we will have an opportunity to see even more convictions from the DOJ in 2020 as the fraud unfolds.

The eventual truth will make it possible that the supply-demand balance goes back to its natural levels, thereby pushing the silver price higher.

Silver’s use is quite directly proportional to the growth in the production of technological devices. The reason is simple – the metal is used in manufacturing calculators, RFID chips, mobile phone batteries, etc.

And, let’s not forget. The world is more and more tech-savvy every single day and the demand is going to be only bigger. That means, again, the higher silver price.

Demand for Silver Keeps Rising

Also, one interesting data is that most of the world’s mined silver is dumped like garbage, and it is more expensive to extract it from the garbage than to mine it from the earth’s crust. Just, for example, 98% of gold mined throughout the history of mankind is still in existence in some shape or form.

This fall in supply will probably lead to a critical point because the global demand for silver keeps rising. In 2019, the industrial demand stood at record highs. As central banks and the ultra-rich load up on gold, another precious metal is being ignored.

The next major silver bull market could be on the horizon, just like Robert Kiyosaki said in one of his interviews.

“I would invest it in U.S. Eagles today, not tomorrow. In my opinion, silver is the most under-valued, lowest risk, the best investment of all asset classes. Why buy stocks and bonds when both are in bubbles? I have been accumulating silver coins since 1964,” explained he when asked how he would invest $100,00 in the next decade. – Teuta Franjkovic

Favorable Conditions Are Likely To Propel Silver Prices Much Higher

With the significant decline in the US Monetary Base since 2016, there are some serious threats facing the monetary system.

These are setting up really favorable conditions for Silver prices and the position it has in the international monetary system. The expectation for much higher Silver prices are certainly reflected in the charts.

I have previously presented this chart (now updated) to show how the current bottoming process (2015 to 2018) is similar to that of 2001 to 2003:

I have marked the two patterns (1 to 5) to show how they are similar. The current bottoming has come to an end, and we have seen a key breakout as expected. This is a chart confirmation that conditions have now turned very favorable to higher Silver prices.

With the breakout confirmed, Silver is now set to continue higher in similar fashion to the 2003 to 2011 bull market. However, this time we will likely see far greater price increases in a shorter period, especially given the serious threats facing the monetary system.

The recent breakdown of the US Dollar Index further highlights the risks facing the monetary system. Below is a chart of the US Dollar Index:

The Dollar Index has broken down from the blue line support, and is likely to drop much lower over the coming months. This support the likelihood of a continuing silver rally over the coming months.

Furthermore, the similarities in the current bottoming of Silver and that of the period from 2001 to 2003 is also reflected in the US Dollar Index chart. Below, is a comparison of Silver and the US Dollar Index chart:

See how the bottoming of Silver lines up with the topping of the US Dollar Index. As the Dollar goes into a deep dive, Silver will continue higher like it did during the first phase of the bull market.