Let's say the past behaviour of the silver price over the past 10 years has indeed gone through the cycle I described in previous posts and that cycle continues into the future.
For this post, let's examine how this cycle has played out in the past, specifically looking at the lowest and highest prices in any given cycle of the silver price.
I calculated the percent price increase from bottom to top, the price decrease from top to bottom, as well as the time lapse between bottom to bottom, days between tops, days between bottom to top, and days between top and bottom. For each of these, I also determined the average, minimum and maximum.
From this, I calculated prices and dates to determine ranges that what I believe these precedents suggest are dates we could see highs and lows, as well as what those highs and lows could be:
As of this writing on 3 Dec 2011, the 25 Sept 2011 of $26.05 was the bottom from the last top of $49.79 from 24 April 2011. In previous iterations of the cycle:
There has not been an iteration where the bottom in silver's price occurred after approximately 5 months, meaning a lower price than $26.05 would be unprecedented in that regard. However, the dates between bottoms, and the price decrease between top and bottom of previous iterations suggest there could be a lower price. This simply means that there is an established precedent for lower prices than what we have seen so far.
One big indicator that this may be the case is the trendline silver has followed since the start of the 2008 financial crisis which as of this writing indicate a price of $24.03 is possible:
While the prospect of such a correction may upset the stomach of those (including myself) who took possession at $29-33, this again reiterates what I have posted earlier, indicating that having an iron stomach is a firm requirement to invest in silver. If silver hits $16.46 (the precedent set by the price correction in May 2004) I believe that will be a phenomenal buying opportunity.
The fundamentals for silver are so strong, that I believe $16.46 silver would be well worth massively over extending to procure it with, but I digress.
In the short term, using precedents from previous tops and assuming the current established low of $26.05 indeed is the lowest price for this iteration of the cycle, previously established precedents suggest the top price could range between $53.78 and $150.29 and that price could occur between 23 Feb 2013 and 9 June 2014.
I must reitereate from my previous post the strategy to employ 2 positions of physical metal - the investment position and the core position. At these prices, I still would not consider touching my core position to sell. If I see these prices and I see other, better investment opportunities, I think these prices would be well worth considering taking some profit from silver, however again, if the $26.05 of Sept 2011 was the low, a repeat of the 1980 parabolic runnup would mean by Sept 2011, silver's price would be around $182.
Given silver's fundamentals, I believe ultimately, the price for silver will still be much higher than even that.
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