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Commodity Trade Mantra | Jun 20, 2019 15:02
The Amount of Dollars in Existence
Silver is currently trading around $14.84 an ounce. This is around 30% of its 1980 all-time high of $50. However, this is an incomplete representation of what silver is really trading at, relative to US dollars.
When you look at the silver price, relative to US currency (the amount of actual US dollars) in existence, then it is at its lowest value it has ever been (see chart below).
Also, it is ridiculous that one ounce of silver cost $50 in 1980 when there were about 132 billion dollars in existence, whereas today it is only $14.84 at a time when there are 3 304 billion dollars in existence (note that I have used rounded numbers which created some distortion).
The US monetary base basically reflects the total amount of US currency issued. Originally, the monetary base is supposed to be backed by gold available at the Treasury or Federal Reserve to redeem the said currency issued by the Federal Reserve. This is not the case any more, therefore, the amount of dollars have grown exponentially over the years.
Below, is a long-term chart of the silver price relative to the US monetary base (in billions of dollars)
Note that the ratio, or price of silver, in terms of US dollars in existence, is indeed at its all-time 100-year low.
In 1980, the all-time high was 0.361, whereas the ratio is currently at around 0.004. The US monetary base is currently around 3 304 billion dollars (or 3.304 trillion). Therefore, if silver was today at its 1980 value, relative to the monetary base, it would be around $1 193 (3304*0.361).
So, in terms of US dollars in existence, silver is trading at 1.24% (14.84/1193) of its 1980 high – it is the bargain of the century.
Silver Long-Term Channeling
On the chart, the first phase of the silver bull market was from 1993 to the end of 2001, and the second phase is potentially from 2001 to the end of 2015.
It appears that there is a similarity between the two phases. I have drawn some lines, and marked some patterns to show how the two phases are interwoven and could be similar.
The first phase is marked 1 to 3, in black, and the second 1 to 3, in blue. Both of the phases appear to occur within a broadening channel, from which they both broke down (out of the channel), after point 2.
Outside of the channel there was a triangle-type consolidation. The first phase managed to get back inside the broadening channel after breaking out of the triangle-type consolidation. If the current pattern follows, then we could have a big rally, after breaking out of the triangle consolidation.
Based on this comparison, buying silver now is like buying silver back in 2003 when it was under $5 per ounce. – Hubert Moolmanh2 The Rise of Silver and Major Economic Decline/h2
After a period of economic prosperity, it is a given that eventually a period of economic decline will follow. This is a well known reality.
Since at least the early 80s there has been a period of great economic prosperity. Yes, there were many recessions during that period, however, as a whole it has been a prosperous period.
Now, there are many signs that we are likely to get a period of serious economic decline. The type that has not been seen in many a lifetime of those living today.
Previously, I have presented a few of those signs (or measures), and now there has been important development of those since then.
Let’s take a look at silver priced in oil (WTI Crude), the Dow and US dollars:
Above, is silver priced in oil from 1983 to now. Price has moved in a large channel before it broke out in 2008. This is really significant given the length of time involved.
However, more importantly there is a massive rounded bottom which is a good base for the coming higher prices. At the end of the bottoming pattern there appears to be a bullish wedge.
Price has now broken out of the wedge, as well as retraced to the breakout area. A breakout at the top line of the giant cup will confirm a hugely depressed economy (more than all recessions of the last 35 years at least)
Just like for oil, the relationship between silver and the Dow is an important measure of economic conditions.
Here is a chart of silver priced in the Dow:
Currently silver priced in the Dow is close to all-time lows. Economic conditions has been favourable to paper and debt-based assets. The bullish wedge is an indication that all this is about to change.
There has now been a breakout of the wedge and the ratio seems ready to go much higher.
On the chart, I have indicated how the periods indicated by the green arrows have been associated with economic prosperity, and the red one with economic decline. Higher silver prices and declining stock prices will virtually guarantee (or represent) major economic pain over the coming years.
The US dollar silver price is currently completing a bottoming process similar to that of 2001 to 2003:
This is indicated by the points marked as 3 to 5, which is forming a triangle pattern. A breakout of the current pattern will likely set off a massive multi-year silver rally.
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