Silver Breaks Out Of 45-Year Holding Pattern - Outlook For PM Sector...

Friday November 28th is viewed as the most important day in the history of the silver market – why? – because as a result of breaking out of the bullish Ascending Triangle that has formed since mid-October, it finally made a convincing and decisive breakout from the gigantic 45-year long Cup and & Handle continuation pattern that has been forming since way back in 1980 which it did with a big $3 move, as can be seen on the CHART OF THE AGES shown below. The formation can also be likened to a pressure cooker with the pressure building slowly and steadily to the point that it blows the lid clean off and Friday’s $3 gain to new highs is viewed as a clear sign that this thing is about to blow.

The reason that silver has barely advanced in price from its 1980 highs until right up until a few days ago and in real terms has fallen heavily is the massive and relentless paper market price suppression scheme that has kept a lid on silver for many decades now. The scamsters perpetrating this fraud have done so with impunity of course – at most being given “slap on the wrist fines” - but the highly destructive result of all this is an increasing yawning gap between growing demand for silver for both industrial and investment purposes and available supply, that has now become as wide as The Grand Canyon since the increasing undervaluation of silver in real terms has meant that there has been little incentive to bring significant new producing silver mines into production and if the world suddenly wakes up to this and decides to do something about it, it will take 10 years to bring any new discoveries to sizable production.

Thus increasing demand for physical silver is suddenly being met with the stark reality that there is none to buy, or very little, especially with major Banks now buying silver hand over fist as it has also been accorded the status of a Critical Mineral. In other words this market is hitting a wall – it is as if a searchlight is suddenly shone into a dark hall full of rats and roaches (the silver market manipulators) who are now all scurrying for cover. This is a very rare situation that looks set to trigger a meltup of astounding proportions – and the long-term chart shows that silver is in position to do just that – meltup, meaning that is will rise very steeply and relentlessly, getting overbought and staying overbought as it ascends to levels that few now believe possible.

So, how far will silver rise? The mínimum measuring requirment for the Cup & Handle pattern shown on this log chart is a move of equal height to the height of the Cup & Handle, which means that it is headed or the $400 - $600 at a conservative estimate. Many of you reading this may think that I have been smoking something, but it’s you who will be standing with your mouths hanging open when it gets there. Mario of Maneco64 has some congruent and interesting insights on all this in his video of the 29th November entitled Silver Follows in Gold’s Footsteps and Mike Maloney’s new video Silver Breakout which is required viewing for those interested in the sector, points out that the Cup & Handle pattern shown on our very long-term log chart for silver becomes a beer stein when drawn on an arithmetic chart. As someone who has lived in Bavaria (Kaufbeuren – one of the only towns in Germany not to be bombed in the 2nd World War) and had his own stein, this has personal resonance.

The implications of all this for silver ETFs and silver stocks is of course obvious – they will moonshot, rising to many multiples of their current prices and the reason for this is not hard to see. Suppose that, with a current price of silver at $55, a silver producing company’s costs to produce are $20. This means it’s making $30 an ounce profit – very good. Now, what happens when silver rises to $200? – it means that of instead of making $30 an ounce profit, it’s making $180, assuming costs remain the same, even if costs rise they won’t rise all that much. This means huge dividends for shareholders and again obviously, a huge increase in the stock price.

Now to briefly look at last week’s silver price breakout in detail on the 6-month chart. This chart shows how the pattern of recent weeks morphed from a potential intermediate Double Top, which made me wary for a while, into a bullish Ascending Triangle which was spotted early on Friday, hence Friday morning’s alert article which was also triggered by the GDX breakout from its consolidation Triangle on Thursday that we will look at before the end of this article. This was certainly an impressive move that at last produced a clear break from the gigantic base pattern.

It was clear from the action late last week that, due to the acute supply shortage, the baton has been passed and silver is now leading gold higher. This doesn’t mean that a sector top is approaching because the silver to gold ratio is still at an abysmally low level – certainly not the sort of reading you associate with a top as it shows that there is still relatively little retail interest in the sector. The job of the John Doe retail investor is to show up much later and buy at the top.

So it is interesting to see what effect silver’s strong rise late last week had on gold. The 6-month chart for gold shows that it hasn’t had much effect – so far – but it did leading to gold breaking out of its consolidation Triangle that has been forming since mid-October above its rising 200-day moving average. This puts gold in position to accelerate away to the upside and we can hardly expect it to do otherwise if silver melts up as expected. The MACD indicator at the bottom of this chart shows that there is “almost a full tank of gas” for a big upleg from here. This observation means that many gold stocks are buys here, even after last week’s gains.

What about gold and silver stocks? Interestingly, silver’s big Friday breakout was presaged by GDX breaking out of its consolidation Triangle on Thursday. While it has yet to break out above the resistance at its mid-October highs, that should follow quite soon, especially as the Accumulation line is already at new highs with momentum (MACD) trending higher.

Finally, “supporting actors” copper, platinum and palladium are all looking good with copper looking set to break out above a line of resistance at $5.20 - $5.25 into another upleg, platinum already breaking higher on Friday and palladium set to follow suit with a large bullish candle forming in it on Friday.

With respect to the perceived lurking risk of a market crash there has, especially in recent years, been a paradigm shift. Because a very high percentage of stocks are now owned by the super wealthy with the little guy having been almost entirely squeezed out, the incentive for the Fed, which serves the interests of the ruling class, to create money to prop up the stock market is all the greater and this is what we have seen repeatedly in recent years. Of course, someone has to pay for all this and that someone is the middle and lower class who suffer from the increasing inflation stoked by all this money creation. In addition, as The Bald Guy says in Gold & Silver Can’t be Stopped Now, somewhere around the 11 minute mark, the impact of crashes and flash crashes on the PM sector has been diminishing over time, with the PM sector front running the recoveries that follow with strong rebounds.

I produced a video about all this today entitled PM SECTOR MAJOR BREAKOUT ALERT – SILVER TO ENTER MELTUP MODE. Next week should be interesting.

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