Silver to outpace Gold??
Dr. Clive Roffey
I have presented numerous articles detailing my bullish analysis for gold and silver. About this time last year I sent out a report to clients detailing the huge prospects for silver and advising a serious position in silver stocks. These have appreciated over 100% since then. Silver is generally regarded as the poor cousin to gold but the technical data indicates that it may well be on its way to the top of the tree relative to the other precious metals.

The silver price has bounced off its huge support base at $4,50. It is attacking the major overhead resistance at $5,50. This is all extremely bullish but the crux of this data is the size and length of the huge base. It has been building for the past 12 years since 1991. Bases of this size and duration do not run out of steam in a couple of years. A base of such magnitude subtends a bull market of considerable power and time. I would postulate that five years will be the minimum bull run period.

The net result of this analysis is that the precious metals are now an INVESTMENT …….. not trading vehicles. One trades bear and range bound markets but you INVEST in a bull market. I am sick of hearing the uninformed keep telling investors to trade the gold stocks. Pick your performing stocks and go on holiday for five years!!

Silver has underperformed platinum for the past fifteen years with a complete performance rout during the past five. But there is a powerful buy divergence on the oscillator. This indicates that silver is likely to turn the tables on platinum. I look for silver to outgun platinum for the next few years.

You do not have to be a genius analyst to see that the downward trend of silver measured against the broad US general equity market has been broken. But a huge reverse head and shoulders pattern has developed over the past six years. This indicates that the silver price should continue to totally out perform the equity market for a few years yet.

The NASDAQ has enjoyed a substantial rally since April with many analysts being prompted to assign the new upward move as the start of a new bull trend. Forget it!!

The silver price has been forming another large reverse head and shoulders base pattern. Once again this formation indicates a huge upside move on the chart in which silver will completely outclass the hi-tech market. This data also indicates that the recent strength of the NASDA was nothing more than a rally in a continuing bear market. Forget the mirage of hi-techs and go for the shine of silver.

I do not believe that it is necessary for me to repeat the analysis!!

The relative strength chart of silver against gold is still in its downtrend showing that silver is underperforming the yellow metal. But there is a huge buy divergence that indicates a change in the trend in the near future. Thus for the next long term phase of this bull market in precious metals I must look to the silver price to out perform the gold price.

Finally the gold price has underperformed the platinum price for quite some time. But during the past 18 months the chart has mapped out a flag pattern indicating an upside surge in the data. This implies that the gold price will well out perform platinum.

The message of the story is INVEST in silver and gold for a LONG TERM bull run.


Dr. Clive Roffey

23 September 2003

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Gold Action is a fortnightly commentary on global gold markets produced by Dr. Clive Roffey who has been a leading independent commentator on gold markets since 1969.