Mayday!

The Chancellor of the Exchequer and the Chair of the Federal Reserve have gone mad.  This week George Osboure has been paraded around television with a Hi-Vis vest on building walls and espousing how well the economic recovery is going. Indeed I am inclined to agree with the figures however, one must consider the context of this growth.  That growth is happening in an economic environment where the economy is artificially inflated from a huge injection of QE (I hope you didn’t forget about that) and that the Bank of England’s interest rates are still 0.5%.  If…nay, When the Bank of England raise interest rates you will see a very different economic picture; the Chancellor knows this as do that small populous of people that will inevitably do very well in a recession.  As interest rates increase the impact will squeeze the profit margin of capitalist banks, and that is not to the liking of an industry hell-bent on making ‘big profits’, so that squeeze will be passed on to you.  It will cost you more to borrow money for mortgages (if you can get one!) and those who already have flexible rate mortgages, get ready for an increase in your mortgage payments.

Should the savers be smiling? After all if interest rates increase, then that means the rates for their savings accounts should increase…. Well maybe, until I tell them that actually, you saving are being eroded by inflation; and no don’t be fooled by the press releases from Mark Carney (Governor of the Bank of England), who states that inflation is sitting below anticipated levels……That’s because of QE people, of course he knows that, but now you do to. 

So where do you turn your future investment and wealth preservation to? You guessed it Gold & Silver. I have added a link on the right hand side – Join the Movement Here!

Silver Forecasts

The wider market is not looking at Gold & Silver at the minute, hence the ridiculous sale price that each metal is trading for.  What you should note however is this, take a look at the picture below – extract from SilverPhoenix 500.

SilverPhonix500 highlights an important factor in the price of Gold & Silver namely, their correlation to the USD, when the dollar does badly Gold & Silver do well.  The rationale for this is that as currency weakens, so does your stock and investment portfolio; imports become more expensive for U.S based business and exports become cheaper, meaning domestic U.S businesses start to decrease in value…. Wall St traders don’t like this so they move their money from Stocks & Bonds to more solid and resistant assets like… you guessed it Gold & Silver.

SilverPhoenix500 shows here that the blue ‘support’ line has been tested 5 times; any trading book you read will probably tell you that this is a sign of strength as the market is rising, but actually what this means is that stop losses are being raised slightly higher, so when the U.S dollar does break down, it will not be a trickle it will be an avalanche.  Greedy stock traders, professional and amateur WILL lose a lot of money when this happens, conversely, holders of Gold & Silver will do very well.

Silver, take a look at this chart, you are a chartist now!

The chart shows the price of Silver from 2010 to present. I would like to draw you attention to the sideways trading rang in 2010 – 2011, the price fluctuated between a low of $15 to $20, after which followed a meteoric rally up to $50 (Holders of Silver did very well out of this).  Fast forward to 2013 – present.  A new trading range has formed from a low in 2013 of $18 to a high only a few months later of $25.

Now comes the analysis – First off, you could compare the increasing lows of the 2013 – 2014 trading range as above with the USD, DON’T. Silver price action works opposed to the USD price as stated above, I believe we are already trading at the lows for this bear market as corporate investors have already instigated short positions, but sentiment is changing with big players like JP Morgan revising their Bearish forecasts to Bullish PURCHASING of Silver. So where can Silver go? Some say given the Gold & Silver price ratio of 1:60, a correction back to the historic norm of 1:9 would put Silver at $144 at today’s values.  I do think that is achievable in time, but for the next 18 months I would be confident enough to assert that Silver will recover back to its 2011 highs of $50 at the very least.

If you want to see you dreams come true, the first thing you have to do is Wake Up!

J.M Power