Silver to out perform US equities
Dr. Clive Roffey
Of the three tradable precious metals, gold, platinum and silver, the last named has been a distinct laggard, but all that is about to change. I am looking for silver to outperform the Dow and other leading global equity indexes. I look for silver to at least equal the performance of gold and to outgun platinum and the Dow. Let's start with the silver price.
Although the price bottomed out in 1993 it has ended up doing very little, or has it? The net effect of the past ten years price movement is a massive sideways trading range. Apart from the spike surge in 1998 the end result has been a disappointing crab like boring picture. In my analysis that is about to change dramatically. The huge size of this base implies an extremely large upside potential in price.
The above chart is the silver to gold ratio and it is obvious from the major downtrend that silver has underperformed its yellow cousin. But the pattern is that of a huge falling wedge. This format has a habit of reversing trend rather dramatically. If this is to be the case on this chart then it implies that silver will outperform the gold price rather spectacularly.
Platinum, above, has had a wonderful bull run for the past three years. But there are some nasty sell signals sitting on the chart at the moment. A second divergence sell is in operation and I must look for a weaker platinum price in the coming months. There is a great deal of talk in South Africa about how the earnings of the two leading suppliers Angloplats and Implats will continue to grow substantially. But that fails to take into account the number of smaller new mines coming on stream that are slowly capping the price. This will not suit Angloplats with its huge expansion programme. I do not like the platinum counters. As far as I am concerned they have had their day.
This chart is the silver to platinum ratio and again shows the extremely poor relative performance of the silver price since 1998. I have shown my proprietary oscillators on this data. When all the oscillators congregate at their extremities it indicates a trend reversal. They are all at their lows indicating that the relative strength line is about to rise in favor of silver over platinum.
But of all the charts the last one is the most impressive. It shows the relative strength of silver against the Dow. After dramatically underperforming the US equity index for the past 15 years it has broken upside. This indicates that the silver metal price will now substantially outperform leading US equities.
I must conclude from this data that silver is about to shine once again. Its price chart looks impressive and all the relative strength data indicates a superior performance potential against gold, platinum and the Dow.
14 November 2002
Dr. Clive Roffey is a leading market strategist. He lives in South Africa and is a top market commentator in that country. He produces Gold Action a fortnightly newsletter on the gold and precious metal markets especially orientated for the US investor.
Email: chartist@hotmail.com
Website analysis: www.utm.co.za
Technical Analysis Course: www.charts.co.za
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