We are currently at an important point of the economic cycle. The end or peak of debt-based assets, and the significant appreciation of real assets like gold and silver.
An example of the last time we were in a similar position is the late 70s. The Dow was at or near peak levels after a multi-decade bull market, while gold and silver was in the midst (or end) of a consolidation (or correction).
The Dow could only start a new bull market after gold and silver had huge blow-off tops.
Below, is an illustration (on silver charts from tradingview.com) of how the current situation is similar to the late 70s :
The bottom chart is silver from 1966 to the end of 1979 and a few years beyond, and the top is silver from 1989 to August 2019. I have highlighted key events on both charts to show how the structure of the two bull markets could be similar. The current structure is bigger in terms of time.
The Dow/Gold ratio peaked in January of 1966, before the start of the precious metals bull market. In a similar manner the Dow/Gold ratio peaked in August 1999, before the start of the silver and gold bull market.
Some time before the first important peak of the silver price in February 1974, the Dow again made a significant peak(in January 1973). This is very similar to the October 2007 peak of the Dow, which came before the April 2011 peak in silver.
Again, after the Dow peak of February 1974, there was another significant Dow peak in December 1976, some time before the peak of the silver bull market in January 1980. The Dow recently made a peak, which could be its ultimate peak for its long running bull market. If this is actually the peak, then it is similar to the Dow peak of December 1976, which came some time before the peak of the silver bull market.
So, if the Dow top is actually in, we could be in the midst of a multi-year silver rally like the one from 1976 to 1980. However, this time the structure of the current financial structure is likely too weak to continue in its current form, and the problems (or debt) is far too big.
It will collapse eventually. The only question is: how far into the current silver rally will it be able to survive?
About the author
