Dow/Silver Ratio Signals All-Time High In Silver Prices
Hubert Moolman | Jun 20, 2016 01:00AM ET
I have written extensively about the relationship between the Dow and silver prices. One of the points I have emphasized is the fact that Dow peaks are often followed by silver rallies.
Given the above, its natural that the Dow/silver ratio is also an important indicator for future silver prices. One example of this, I deal with in my silver fractal analysis report:
The top chart is the Dow (from 1980 to 1994), and the bottom is silver (from 2000 to 2012).
In 1980, the Dow made a bottom, as measured in silver (Dow/silver ratio bottom). For silver, a similar bottom would be when the Dow/silver ratio peaked in 2001. For both charts, these points (respectively) were at significant lows (significant lows just before the start of the bull market).
The first important peak for the Dow, since the Dow/silver ratio bottom came about, was after 7 years (and 7 months). For silver, the first important peak came about 7 years after the Dow/silver ratio peak.
The second important top for the Dow came about 10 years (and 6 months) after the Dow/silver ratio bottom. For silver, the second important top came about 10 years after the Dow/silver ratio peak.
This clearly shows that there is a measurable relationship between silver prices and the Dow, and that one can use the Dow/Silver ratio to help predict future silver prices. For example, this ratio could be very instrumental when formulating an exit strategy for silver.
Below is a long-term chart of the Dow/silver ratio:
On the chart, I have indicated some key financial events. I have also marked two fractals (A to D). Both fractals, or patterns, exist in a similar manner relative to the key events indicated.
Point A (of both patterns) is at the peak of the Dow/silver ratio, just before the start of the silver bull market. In both cases, silver made a major bottom, soon after the Dow/silver ratio peak.
Point B (of both patterns) is the bottom of the Dow/silver ratio, just after a significant silver peak.
Get The News You Want
Point C (of both patterns) is the top of the Dow/silver ratio, right at a significant silver bottom. On the 1970s pattern, point C was the low before we eventually had the rally that took silver to the then all-time high of $50.
If the comparison of the two patterns is justified, then we will have a similar rally (in the near future) that will take silver to a new all-time high. Furthermore, the top of the Dow/silver ratio in 2001 is most likely a mega-top. Given that this is likely a mega-top, I would expect the Dow/silver ratio to go lower than the 1980 low.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.