Silver is a real purchasing power

When fiat currency gets a regulating hand not by a free market but the meddling of politics trying to micromanage a market mainly through narrative, manipulation of the psyche of market participants, restraints are...

by Korbinian Koller via Midas Touch Consulting

You get bombarded with financial terms and economic and historical theories that make the mysteries of the market even harder to decipher. In effect, market workings aren't as difficult to understand. They are psychological in nature and, when left alone, regulate themselves quite efficiently. We mean to say that without outside interference, the market is like a breath, and prices go up, sideways, down, sideways, and up again. It is a pendulum from averages to extremes and again returns to the mean. Once interfered, things get out of whack. One such interference was the abandonment of the gold standard. It served as a limitation to the discretionary monetary policy. It prevented extremes, prevented the economy from running out of breath. Now, silver is a real purchasing power.

What do we mean by that? When fiat currency gets a regulating hand not by a free market but the meddling of politics trying to micromanage a market mainly through narrative, manipulation of the psyche of market participants, restraints are out the door. Human greed is taking over and worse, the ego suggesting that we can control an entity like the market with a degree of variables so high that any intervention is speculation at best. Such failing efforts typically turn markets sour..

What this means for you is that unnatural extremes are at work, affecting your portfolio disproportional.

Easily, an illusion is created to be fooled that one's monetary gains in the market are plentiful. However, the reality is that when comparing your percentage gains to the actual purchasing power of what this money buys you, a rude awakening is guaranteed.

When looking at your monthly expenditures for basic needs like living costs and food, it is astounding why that narrative has not found its way into the news yet. What is real is what precious metals like gold and silver are buying you now and in the future. A change of thinking is necessary to think in real purchasing power and not in percentage gains on fiat currency advancements.

S&P 500 in US-Dollar, Weekly Chart, Too clean:

S&P 500 Index in US-Dollar, weekly chart as of August 28th, 2021.

The weekly chart of the S&P 500 above shows how unnatural the growth of the stock market is. Typically, in a self-regulating market, you will find no such clean up-drift. Why would all these companies have doubled in value in a time of economic crisis? Printed money flowing directly into the market has more than doubled the index value in less than 18 months? We would call this rather an upward market crash, where your purchasing power loses value. We are watching the lower green line of the linear regression channel for a price violation. It would indicate a confirmation that exuberance has come to an end and an early indication for watching larger time frame silver entries after a brief steep decline.

Monthly Chart, Gold/Silver-Ratio, Ready for an extra boost:

Gold/Silver-Ratio, monthly chart as of August 28th, 2021.

Another indicator we have an eye on is the gold/silver ratio. We entered the early stages (orange line) of a ratio level where silver might be turning. Consequently, silver could be gaining momentum towards gold. Should prices reach the red box, we aggressively look for a smaller time frame, low-risk silver entry spots.

Silver in US-Dollar, Monthly Chart, Bullish between the lines:

Silver in US-Dollar, monthly chart as of August 28th, 2021.

A monthly look at silver shows a decisive breakout from a multiyear sideways range. Exhausted after a 159% advance, silver is trading within a range again for more than a year. We first had a double bottom, followed by a double top to define the range, and right now, a triple bottom showed strength. This strength could prove to be very significant if held through this month. We identified two essential details as well. For one, the white dotted line shows higher lows on the range lows, indicating strength. And secondly, prices did not return towards the mean(blue line), indicating directional strength as well.

Silver in US-Dollar, Daily Chart, A bullish tone:

Silver in US-Dollar, daily chart as of August 28th, 2021.

Zooming into the daily time frame, we can see that we have entered into a short-term, low-risk advancement window after Friday's strong close. For one between US$24 and US$24.50, the price finds itself not obstructed by a support/ resistance zone. Secondly, from a fractal volume analysis point (green histogram to the right of the chart), prices can also advance easier between the prices of US$23.90 and US$ 25.15. There are two edges derived from this data. A significant fending off the low range from US$23 to US$24 will make a strong point for higher timeframes if this month closes above US$24.25 and a bullish tone for the upcoming week.

Silver is a real purchasing power:

Precisely 50 years ago, Richard Nixon gave up the gold standard. And greed got yet again hold on to the market. We find these extremes in the stock market unsustainable and investments into the precious metal sector to be a prudent hedge for balancing your REAL purchasing power. Probabilities speak against a long-term outcome that human nature finds its way naturally back to the mean. More likely, we crash as we have in the past. A scenario that can result in a rude awakening for the many who trusted in narratives well-orchestrated. Most follow their intuitions to hold on to outdated paradigms at a time when buying insurance in the form of physical precious metal investments is one's safest bet.

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This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are the author's alone and do not necessarily reflect or represent the views and opinions of Midas Touch Consulting.

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