When (Not If) Silver Has a "Bitcoin Moment" / Commodities / Gold & Silver 2019
In mid-May 2019 the leading cryptocurrency, Bitcoin(BTC), was trading around $5,600. At $4,000, a prominent technician predictedit was gearing up for a run to $6,500. Yet when it reached $5,700, herecommended selling because of a technical "non-confirmation."
As if on cue, BTC began an epicupside run, easily slicing through his initial target! Following an $8,600print, the price cratered to $6,600, then back to... $8,400! Who knows where itwill be when you read this, but I suggest that there is something important tobe learned here…
The moral of this little tale is that when holding aposition like physical metals, which has gone through a lengthyunderperformance, the tendency is to liquidate it at the first sign of a strongprice rise.
But you might also be selling out of what becomes anepic bull run. There's just no way to know for sure ahead of time.
It's absolutely vital to "take some profit"as long as you distinguish between "speculative" and Core holdings.Don't sell the Core until you feel strongly that the secular run is coming toan end.
In 1999, Warren Buffet publicly stated that he believedthe stock market bull was over. It lasted another year, but since he "gotout too soon," he was able to side-step the carnage that followed.
A number of years from now, evidence may indicate youshould sell all but your insurance portion. Even if the top is higher, but youmanage to take a big bite from the middle, that's great!
I personally knew of such a "sandwich trader' – aCanadian who bought silver futures and physical metal at $7, selling ALL of itat $18. Of course, the price eventually went to $50 in early 1980, but he neverlooked back; never tried to buy in again. By sticking to his plan, he literallymade and kept millions.
Others, who got in much higher (or lower but neversold) saw silver decline precipitously from $50 to $10.80, and then rally to$25 (the classic 50% retracement), before slowly sinking to $4 over the nexttwo decades.
Could Silver experience one (ormore) "bitcoin moments"? I believe the answer is "yes."
Conceptually, some similar elements are in place. Frommid-2011, silver has experienced a lengthy, corrosive decline. In December2017, after bitcoin topped near $20,000, it(like silver) established a series of lower lows and lower highs under a floodof negative press - classic behavior during an entrenched bear phase.
No one has predicted that silver will go to zero likethey have for bitcoin (because silver literally cannot), but a chorus ofworn-out bulls and perma-bears still opine that the metal is either destined toflat-line forever or have any rally capped by "da boyz" on WallStreet or the Federal Reserve.
If you feel this way, consider that silver alone amongthe metals has yet to exceed all-time nominal highs above its futures basis$52.
More to the point, don't forget the twin cautionarypoints long espoused by DavidMorgan:
First, that the market isultimately more powerful than any opposition arrayed against it.And Second, that as much as 90% of the total move in a bull run takes placeduring the last 10% of the time involved.Let me add a third factor to DavidMorgan's take which we fully discuss in our book, Second Chance...
We have not yet seen a public-participation maniablow-off to signal culmination of the final and most explosive phase of asecular trend that's been backing and filling for almost two decades – a topicto which I've devoted several essays at Money Metals during my five years as acontributor.
You can – and should – do the research yourself, but Iwill say without equivocation, that the most explosive, most profitable phaseyet (for the reasons David Morgan has repeatedly stated) lies directly ahead.
It might take 3 to 5 years to fully play out, or asmany as 10, but it's on the way.
I see newly visible meaningful data points indicatingthat the onset of a powerful, enduring next leg up is germinating right now. Itcould announce itself as a "bitcoin moment" – likely just one ofseveral big spikes on the way to three-digit silver.
TheShanghai Gold Exchange continues to achieve record silver volume.
Imagine the following scenario....
Silver prints a new intermediate, several days' lowunder $14 on the charts, then moves back up for awhile into wide-ranging"get nowhere" prices.
One day (probably in a Sunday evening market session)the price jumps seventy-five cents, and during the next few days, rocketsupward several dollars, running to a two-week close above $25 the ounce.
It then proceeds to collapse back to $20, a classic 50%Fibonacci retracement level.
Now what? Do you buy $5-6 higher(at more expensive premiums and questionable supply) than you could have just afew weeks before? Or hope this is just a "bull trap" that retreatsback to $14?
So you wait. What if you're wrong, and silver vaults toa new multi-year high at $27... on its way to $40 (or higher)?
Lest you think this is not possible, consider that thehistoric 1979-80 moon-shot saw several four-dollar silver intraday fluctuations– at a time when the purchasing power of five dollars now required just onedollar back then!
So, don't sit around with "not enough" – ornot any – physical silver (and gold) until a"bitcoin moment" in the metals takes place.
If you hesitate long enough, you just might findyourself benched during the entire "last 10% (and majority profitpotential) of an explosive finale. But by all means, avoid contracting aterminal case of FOMO (fear of missing out), which causes you to buy the top!
David Smith isSenior Analyst for TheMorganReport.com and a regular contributor to MoneyMetals.com aswell as the LODE Cryptographic Silver Monetary System Project. He hasinvestigated precious metals’ mines and exploration sites in Argentina, Chile,Peru, Mexico, Bolivia, China, Canada and the U.S. He shares resource sectorobservations withr eaders, the media and North American investment conferenceattendees.
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