The Dow/Silver Ratio Signals All-Time High Silver Prices
I have written extensively about the relationship between the Dow Index 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, it’s 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). Both charts are from tradingview.com.
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 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. Consequently, one can use the Dow/Silver ratio to help predict future silver prices. For example, this ratio will be very instrumental when formulating an exit strategy for silver.
Below is a long-term chart of the Dow/Silver ratio (from tradingview.com):
Indicated on the chart are 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.
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.
For more on this and this kind of fractal analysis, you are welcome to subscribe to my premium service. I have also recently completed a Silver Fractal Analysis Report as well as a Gold Fractal Analysis Report.
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Hubert Moolman is a self-taught gold and silver analyst who writes a precious metals newsletter specializing in fractal chart analysis and monetary fundamentals (especially gold and silver). He has a background as a Chartered Accountant, and managed his own firm for 9 years. He also has a website that publishes educational articles on gold, silver and the dangers of fiat money.