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Bullion Breakout Builds: Silver +$26 oz, Gold +$2,300 oz

Summary

  • Silver bulls are excited about the breakout above $26 resistance.
  • Silver and gold are expected to rise significantly in the coming years?
  • The mainstream media has not been paying attention to the rise of gold and silver.
  • Central banks have been buying gold in record amounts in the past two years.
  • Will gold reach a final bubble before the end of the post-WW2 debt super cycle era, and silver will outperform gold?
  • CNBC coverage highlights bullish sentiment for gold and silver in India and Japan.
  • Analyst Nicky Shiels's argument that central banks won't allow gold to go to "cocoa" is refuted with historical data.
  • The spot gold price and silver price both reached record highs this week.
  • The gold-to-silver ratio is declining as silver outperforms gold.
  • Past bull markets are referenced to predict future price movements for gold and silver.

On a technical basis for silver bulls like myself, breaking through 26 resistance this week was an important move.

Uninitiated normies watching this week's SD Bullion Market Update likely won't understand. But in the coming years, if they can look back at this video. Well, they'll likely understand it better by then.

It was captain obvious by Tuesday afternoon that this would end up a good week in on paper performance for silver bulls.

Later in this week's update we'll take a look at some longer term charts and past historical analogues to try and glean how long this run might go before an eventual price pull back and consolidation of gains.

The mostly dumb founded media has thankfully not been pumping gold or silver all that much.

And while central banks have been buying gold bullion in record size the past two years.

Neither the institutional investor class nor the typical media attention required to pump an asset class higher have not arrived, yet.

Of course, I maintain my long term view that this eventual coming gold mania ahead is likely going to become the last and final bubble of the post World War 2 debt super cycle era. Silver will of course tag along for this crazy coming ride. And yea, it is gonna get nuts.

More on that in the second half with some sobering data facts, of our bullion market update this week.

First let's take a ride around the world starting in the east and ending in the west with some decent CNBC media coverage of what is already happening for gold, and now even silver bulls.

Of course, that is their current Indian perspective and if we take the long yearly price chart view of gold on the left and silver on the right in fiat Indian rupee terms throughout this full currency era. Their take on leaning into silver momentum certainly makes sense technically speaking.

Gold in India will continue up and to the right, but silver in India is breaking out of a powerful cup and handle formation now having passed its 2011 highs recently.

Is it any wonder that India has been setting a record sized rush to buy silver bullion inventories to start the first quarter of this year 2024?

Japan in fiat yen terms is also about to pass its 2011 high in local silver prices.

The fiat yen in gold terms broke out well before the fiat US dollar gold price did. So it would be recent rhyming if silver in fiat US dollar terms were to follow suit in the coming years.

On the bigger picture side of the once strong fiat yen versus US dollar equation.

Here is the yearly fiat yen versus gold on the left, and silver on the right hand side throughout this full fiat currency era.

Gold in fiat $JPY is already nearing +2X its 1980 high. 

As I showed you in the chart prior. Silver in fiat $JPY is about to pass its 2011 highs.

The key point here is silver in fiat Japanese yen terms still has to be nearly +3X from now to meet its seemingly ancient 1980 highs.

Remember gold leads, silver follows then outperforms in bullion bull manias.

That old 1980 silver high will get left behind like gold has already done so.

Onwards to CNBC in the USA who had on the insightful Pamp Suisse analyst Nicky Shiels.

Not to dunk too hard on Nicky's head but she started this week with the following two tweets stating the following. 

"Gold will never "go cocoa". Central Banks won't allow it; they own too much, over $1.2bn oz (~10x annual supply)." 

"And IF it does (it’s not a 0% probability, maybe a 0.1% probability), no one would want to live in that world."

Well, that short sighted take had to be rebuked with historic data and financial history rhymes.

We covered part of this topic here in our SD Bullion Market Update last week.

But 3 long term charts disprove that recency biased take.

During the 1970s gold did a double cocoa move. The world did not end. 

Matter of fact, the 1980s were a great decade to grow up in, in many ways.

Central banks at that time collectively owned just under 1/2 of the world's total mined gold supply at the time.

Here's how much gold dominated central bank global international reserves by the 1980 highs. Accounted for as high as 73% of sovereign savings were in gold bullion.

Today even with record sized central bank gold buying the last few years. We're at what, a pathetic 17 to 18% level.

Of course, we played a major in the shrinkage of gold bullion versus other paper IOUs as sovereign savings over suppressed gold values.

Perhaps our most successful export has been the fiat US dollar and the Treasury bonds bills and IOUs that helped fiat financialize the world we find ourselves in today.

And while bullion is breaking out regardless of the fact that the fiat US dollar remains relatively strong still for now. On the other side of this break we're going to look at some damning historic data, and gargantuan net present value promise piles we are not going to be able to keep in real terms which will certainly bolster bullion values to come.

Stick around.

The spot gold price had another record nominal high close in fiat US dollar terms finishing the week near 2,330 oz bid.

The spot silver price ramped after clearing 26 early in the week to close trading at $27.50 oz bid.

The spot gold silver ratio shrunk to 84 given silver's strength on the week.

Gold's 200 day moving average is getting close to $2,000 oz adding another plank to the building support of the building nominal price.

If we somehow see $2,400 oz gold in this run we will have reached pretty rarified air in terms of that happening a dozen times throughout this full fiat currency era.

On the silver side of the equation, this recent move could just be starting. Key technical levels to watch next are $28 resistance which should prove strong. And of course the TAMP down the $30 oz line. 

When that finally gets taken out again is impossible to say. But I can tell you, breaking through that resistance at some point ahead, is inevitable.

If we go back and look at how gold on the left and silver on the right behaved during their late 1978 breakouts, we can see that $200 oz gold acted a bit like $2,000 oz gold has in the last few years. 

For a while it was resistant, then it became support for 4 folding gold's spot price after its final tap in late 1978 by early 1980.

You can see there was a -20% fall over November 1978 from $250 oz down to rebound off the $200 then price support. Wild short term price swings can and do happen during bullion bull markets. 

Interestingly silver that same month shrugged it off better than gold and marched on to damn near a 10 fold in price within 12-13 months to follow.

If we look at past precedents regarding the spot gold silver ratio when bullion bull markets broke out. The late 2008 into early 2011 move is interesting to note.

A collapse from about 84 to 34 played out over a then two and a half year timeframe.

This time we're again up at historic GSR nose bleed mid 80 levels. But we're coming off one of the largest pendulum swing highs ever hit in the spot spot GSR in history during the COVID 2020 spike.

Often in financial markets, exacerbated swings one way are eventually followed by exacerbated swings and spike lows in the other direction.

Moving on to damning unfunded promise piles called Social Security, Medicare, and Medicaid. 

The US Treasury has this forecast of their net present value in terms of costs going out on what they call an 'Infinite Horizon'.

And by infinite, get this, they mean 75 years out from now.

Basically the average lifespan of a young US citizen in the present day.

US Treasury head Janet Yellen signed it. And the number I am about to tell you has nothing to do with now nearly $33 trillion in US debt already built through the end of 2023.

In net present value terms, the US Treasury states the combined coming 75 year expense is $175.3 trillion at the end of last year.

At the very least they state it can only be satisfied through increased borrowing, higher taxes, reduced program spending, or some combination.

I am going to put my political finger into the wind and guess that younger generations are going to renegotiate this unpayable deal they never made, as they eventually come into power.

Former fiat Fed head in 2005 already told us the obvious point regarding Social Security and the underlying future fiat currency payments in question.

OK, OK I know it's scary especially for anyone nearing retirement age or having already paid the bulk of their life's work into this poorly designed, pay as you go, supplemental retirement payment system. 

Remember how last week we looked at the fact that ballooned to nearly 250% debt to GDP following the 2nd world war?

Well we're not even at 130% yet. We got that going for us.

Since WW2 the British pound has lost over -99.5% of its value to gold bullion to date.

As our debt to GDP levels keep ballooning this decade likely into next, what do think is gonna happen to confidence?

If the fiat US dollar were to catch up to the losses the fiat British pound has already versus gold to date, we're looking at a spot gold price of over $8,000 oz.

That of course should take a while yet. But time is speeding up.

The central banks know this current system is failing. 

The damning arithmetic and unfunded promise piles are clownishly unpayable.

So, what to do?

How about further consolidating the banking system and clamp down for more control over payment systems.

Last week, SWIFT announced a new CBDC platform launch in the next 12 to 24 months.

This week,

Federal Reserve Bank of New York

Bank of France (representing the Euro)

Bank of Japan

Bank of Korea

Bank of Mexico

Swiss National Bank

Bank of England

& BIS announces Project Agorá.

They paint this soft launch program as an exploration in tokenization of cross-border payments.

What it really means is, CBDCs are coming and now many of the world's largest central banks are admitting so from their respective digital sand boxes.

This has been their plan for some time now. Each month we get closer and closer to the likely crisis which will be used to introduce us to their new oncoming payment systems.

The fiat Fed knows its a hot button issue and will keep playing possum and coy. But it's in the works and they are telling us point blank now.

I know, it's not the happiest of news to end this week's update on.

And yes, for years now bullion bulls it has certainly felt like we were a small group of weirdos betting on the inevitable.

But as this mania really gets moving in earnest, bullion is going mainstream.

And as they move to try and further push and prod us into a further digital clown world of devaluing promise piles galore. 

At the very least you should have a prudent position of your net worth privately held outside their collapsing systems. That bullion is going to revalue much, much higher in the coming tumultuous years and even decades.

That will be all for our weekly SD Bullion Market Update. 

And as always to you out there, take great care of yourselves and those you love.

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James Anderson
James Anderson
Senior Market Analyst & Content

A bullion buyer years before the 2008 Global Financial Crisis, James Anderson is a grounded precious metals researcher, content creator, and physical investment grade bullion professional. He has authored several Gold & Silver Guides and has been featured on the History Channel, Zero Hedge, Gold-Eagle, Silver Seek, Value Walk and many more. You can pick up Jame's most recent, comprehensive 200+ Page book here at SD Bullion.

Given that repressed commodity values are now near 100-year low level valuations versus large US stocks, James remains convinced investors and savers should buy and maintain a prudent physical bullion position now, before more unfunded promises debase away in the coming decades...

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