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Silver has Probably Made its Low

In October, we alerted traders at SafeHaven to watch gold and silver prices for a development that could signal the market low:

"Traders should be aware that gold and silver are likely to make their respective lows at approximately the same time, possibly even within the same hour. In addition, silver is more susceptible to a drastic spike low, because its price tends to be more volatile, and it represents a thinner market. With silver, a spike low has a chance of reaching the target area shown earlier on the monthly chart. Although the spike low may not feel like a safe buy in the moment, it probably will be a good opportunity to shop for value."

Our forecast was correct for silver. (Gold did not quite match our expectations, and we address that subject at the end of this post.) We believe silver put in a fairly durable low on the evening of November 30, 2014, and we are now looking for confirmation that price will climb in a move that should last through much of 2015. Factors that lead us to this conclusion are:

  • The pattern reflects an apparently complete wave count, which we have been updating here from time to time.

  • With the scary spike low of November 30, price poked into the target area we have been mentioning here at SafeHaven since September 2013.

  • The low arrived in line with expectations for the dominant 62-week price cycle in precious metals, and the cycle has now moved into its upward phase.

The monthly chart below shows the broad structure of the move down from 2011, as well as the expected upward path from here. The decline took the form of a three-wave move, which could be the entirety of a correction or merely the first part of one. We are provisionally treating the decline as the initial wave A of a lengthier corrective move, which is consistent with our expectation of relatively low interest rates persisting into 2016. Thus, we believe an upward wave B is due as the middle part of the correction. The B wave probably will consist of three parts, although it could become more complex than that.

Our chart presents some likely target resistance levels based on the assumption that November represented a low. The first confirmation that this count is working would be a break and close above the upper channel boundary on the monthly chart, which presently is near $18.00.

Monthly Silver Futures Chart

As we noted earlier, we expected gold and silver to put in their respective lows at the same time. In examining the wave counts before and after the November low, we have concluded that gold actually did put in its pattern low, but that it was an example of a truncated pattern. All other aspects of the wave count appear complete. Thus, we believe gold also is due to rally for several months or longer, tracing a large and perhaps choppy B wave.

We hope this analysis is helpful in your trading. At our website, you can find a current weekly chart for silver with a more detailed wave count into the low, as well as near-term resistance levels going forward. Also watch for our upcoming quarterly market forecast book, which should be available near the end of January.

 

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