Silver was The National’s tip for 2016 and its price was up 15 per cent year-on-year, albeit well off its peak gains during the year of 50 per cent.

That was better than the booming US stock market and double the gold price increase; and SILJ, my favourite junior silver producers Exchange-traded Funds, rocketed 177 per cent. But this may just be the start of something much bigger.

The National are not generally very excited by technical charts. The current 10-year silver and gold charts are an exception to this rule.

Basically 2016 looked like a repeat of 2008, and if 2017 looks like 2009, then the follow through is about a 60 per cent increase in the gold price this year.

For silver, whose price is almost always leveraged to the gold price, the price gain should be even more spectacular, doubling to US$30-plus an ounce if 2017 matches 2009. And if the pattern continues as it did until April 2011 then a spike to near $90 is in order in 2018, after a period of consolidation.

Another phenomenon we should be looking out for in gold and silver are the price spikes that would normally mark the end of what have been very long bull markets for these precious metals since 2000.

Hot Commodities: How Anyone Can Invest Profitably in the World’s Best Market author Jim Rogers, who spotted the 2000 bull market in commodities ahead of other analysts, says he has never known a bull market in any commodity to end without this sort of a price spike.

The 2011 spike in silver to $49, just shy of its 1980 all-time high, may well have been a fake top. It was just not confirmed by anything close to a spike in gold whose peak of $1,923 in October 2011 just looks like an interruption of a long upward trend. No price spike, no end to the trend, although that price spike must be near now.

Turning then to the fundamentals that drive gold and its sister silver higher, what is it about 2017 that should make investors feel confident about the outlook? 

It is true The National was wrong-footed like many into thinking that Donald Trump’s election would herald a big rally for gold and a slump in stocks, while the reverse has happened.

However, it could well be that this analysis of uncertainty due to the maverick new president was just mistimed rather than misinformed. Once his inauguration is over on January 20, financial markets may head south and precious metals turn up.

Source: The National

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