The following silver chart will be familiar to everyone who follows my work. I first presented this pattern in my newsletter about twenty years ago, and I have been tracking it closely ever since, though recently there has been a twist to the way this pattern has developed.
I have been describing silver’s long-term chart pattern as a rounding bottom, which shows distribution from the 1980 peak to the early 1990s, followed thereafter by a decade trading range and then a decade of massive accumulation. In other words, over this period silver moved from overvaluation and selling by weak hands, to undervaluation and buying by strong hands.
The new twist to this pattern is that the rounding bottom has evolved into a ‘cup with a handle’, which I have drawn on the chart (outlined in green).
Regardless of the name we call the above chart, the bottom line is that it is presenting a very bullish picture for silver. After a decade or so of distribution, a decade in a trading range and another decade of accumulation, silver is in strong hands, particularly after the onslaught it endured the past two years.
Technical analysts will note, however, that the above pattern is not complete. More of the story has yet to be told. Perhaps the chart pattern will fail, or perhaps the pattern will complete in the months ahead with silver moving higher to completely form the handle, which is what I expect.
Of course, the pattern will only be complete when silver moves above the lip of the saucer, which is its record high of $50. If that happens, then silver will begin stage two of its bull market.
In summary, the outlook for silver is spectacular, and my recommendation for both precious metals remains unchanged. Accumulate gold – and if you are inclined to accept the greater volatility, then accumulate silver too – on a cost-averaging program with monthly (or quarterly if it fits your budget better) purchases. By doing so you are saving sound money. Buy physical gold and physical silver only.
If you are professional trader or speculator, for my specific trading recommendations, see Trading.