A lot of people were knocked out of the gold and silver market because of panic during the last two weeks; they capitulated or sold short near the bottom. Many others exclaimed that the gold age was over. However, I see the rising sun in the morning. Both gold and silver will start a new age. In this paper, I’ll try to tell you why we are in the beginning of a more splendid era for gold and silver. I’ll also share with you why silver will be a supernova in the following decades.
1. Capitulation, Rivers of Blood
If you ask me which words I’d like to use to describe the gold and silver market in the last two weeks, “Capitulation, rivers of blood” is my answer. According to the Weekly Commitments of Traders Reports released by the CFTC, the net long of small speculators decreased by 24,310 contracts for gold and 7,846 contracts for silver from April 9 to 23. This means that a gigantic short position was transferred to small speculators from smart hands. The capitulation of small speculators always signals an end to the last bearish trend and the beginning of a new bullish trend. I hazard to say that gold price below $1,500 and silver price below $26 are the short traps. It will not last too long.
2. The Secular Trend of Gold and Silver Is Still Intact
Figure 1: Monthly Logarithm Chart of Gold Price
Figure 1 is the monthly logarithm chart of gold price. We can see a secular trend line A-B-C. It’s really miraculous to witness gold eventually find its support in such a perfect pattern. I don’t need to say anything more. Just remember the price and the date, $1,323/oz on April 15. It will probably be the end of the last correction wave which lasted about 20 months. Why do some people shout that the gold age is over? In fact, the real splendid bullish trend with an accelerated rising speed is just beginning. The long period trend of silver is stronger than gold. Figure 2 is the quarterly logarithm chart of silver price. The $22/oz on April 15 did not even touch the A-B-C trend line. This price is just above silver’s high price in 2008, another way to confirm the end of the down trend. To respond to the so called “the gold age was over,” I would rather say that the door to a new gold age is just opening and the supernova silver is making its debut.