Will Silver Hit US$11.70 per Ounce?

We certainly live in crazy times.

The Brexit has shocked the financial world. Commodities, precious metals, and stocks have gone parabolic!

Back in the real world, the times aren’t so rosy.

Australia failed to elect a government over the weekend. In my view, contrary to the mainstream opinion, this is a great result. Politicians will find it difficult to govern, meaning neither party will be able to do anything. In other words, they can’t keep destroying our economy.

Unfortunately, Europe isn’t so lucky. Its economy’s destined to crash and burn. When this happens, how will silver fare? We’ve seen it surge recently. Silver could be in the early stages of a bull market. Or a massive bear trap. If it’s the latter, it could hit US$11.70 per ounce in the months ahead.

I’ll explain…

Europe’s one-government dream is finished

Following the Brexit, while laying on its death bed, the European Union (EU) is refusing to admit defeat. Rather than reforming, it’s digging in its heels and trying to create a ‘political union’.

The EU heads of state, whom are largely disconnected from their people, have drafted a nine-page ‘vision for Europe’ document. It details an ultimatum for a superstate, where the EU wants to grant itself more power by usurping more control over its member states. In other words, eliminating government at the state level, the EU wants to federalise Europe.

Germany and France — the pioneer states behind the project — want policies that will fit all states. Of course, this is impossible. Each European economy is vastly different, which is why Greece and Italy are virtually bankrupt. Yet, despite this fact, France and Germany — the largest economies in Europe — are pressing forward with the political project.

It’s going to end up an absolute disaster, which will see Europe’s economy crash and burn in the months ahead.

To make matters worse, Germany and France want to hold most of the power. So when the ‘superstate’ is formed, they want to give the final ‘wink and nod’ on all decisions. No one else will really get a say.

While the plan sounds like a nightmare waiting to happen, it isn’t that different to Europe’s political structure today.

As I discussed yesterday, Germany holds most of the power in continental Europe. After all, it’s the largest economy by far. And, as the saying goes, whoever has the most money makes the rules!

Germany to leave the European Union?

German leader Angela Merkel is solely responsible for destroying Europe’s economy. Her ruthless attitude towards Greece last year, where she drove home a ‘shut up or get out’ policy during the Grexit negotiations, led to a huge change in heart.

She gave the green light to the ‘open-door’ refugee policy. Of course, this worked out well…

Merkel insisted that ‘we will manage’ the challenge of integrating migrants last year. Following those wise words, Germany registered nearly 1.1 million people as asylum-seekers. While Merkel’s government has tightened asylum rules, ignoring demands for unilateral national measures, she won’t backtrack on the policy.

I guess it doesn’t really matter. Politicians no longer serve the people. They are detached from reality, and only serve themselves. The biggest joke is that, after her refugee policy, Merkel became the ‘Time Person of the Year’.


Source: Time
Click to open new window

Here’s another quick fact…

Did you know that another German leader, Adolf Hitler, also became the Time Person of the Year in 1938? Perhaps, with the world economy crumbling before our eyes, history will sadly repeat. While I don’t want war, the chances of a major war breaking out are increasing. More on this later in the week.

Back to Merkel…

Following her hard stance on Greece and the refugee crisis, Merkel has lost huge popularity within her own country. For this reason, she could easily lose the next election on 22 October, 2017.

The election may not come soon enough. The global elite are running the world economy into the ground. They are increasing taxes to pay for their debts. But, this is only crushing confidence and economic activity.

Remember, higher taxes mean less disposable income, which means less consumption spending, which means lower revenue growth for business, which means more automation and less hiring, which means less growth and lower taxes. Government’s answer to that is to raise taxes. It’s a revolving nightmare.

Europe is heading towards a major banking crisis, which will turn into a sovereign debt crisis. The financial meltdown has already started to unfold, accelerated by the Brexit. The next financial crisis could start exploding before the German elections.

If Merkel loses control of Europe, it will send a bombshell across the financial and political world. A new government could lead to unthinkable changes. According to expressco.uk,

Far right figures in Alternative for Germany have promised to call their own vote if they clutch power in country’s general election in autumn next year. 

A party spokesman branded Brussels a “bureaucracy monster”, before adding: “Next year the AfD will enter the German parliament and Dexit will be top on our agenda”. 

They called the vote a Dexit as it stands for a Deutschland exit from the EU.

AfD chairman Bjorn Hocke said: “I know the German people want to be free of EU slavery.”

If Germany leaves the European Union (EU), the political project is over. The next project to crash and burn will be the euro.

Merkel is fighting an uphill battle. With a major financial meltdown becoming clearer by the day, will silver survive?  Perhaps. But, I don’t know about the early stages.

I’ll explain…

Can silver survive the sovereign debt crisis?

At the moment, silver is going parabolic. It’s trading at US$20.38 per ounce today. You can see that on the monthly chart below.


Source: Resource Speculator
Click to open new window

The chart shows that silver bounced off the red trend line in December, which dates back to the 2001 and 2007 lows. For this reason, there’s a chance that silver could have bottomed at US$13.62 per ounce in December. In other words, while I have my concerns, we may be in the early stages of a silver bull market.

But, let’s dig a bit deeper…

The pink trend line dates back to the 2008 high of US$21.35 per ounce. It also lines up with the 2011 breakout and 2013 low. With the US dollar rising, and a major global financial crisis looming, silver could crash back towards this trend line in the months ahead. That would put silver around the $11.70 dollar level.

Remember, silver crashed by 50% within eight months of the 2008 Global Financial Crisis. I expect the next financial meltdown to put huge pressure on the precious metal. Let’s not forget, silver is an asset — not a currency.

On that note, let’s get back to the chart…

The green line shows the projection from the 2015 low. This shows that silver could re-test the US$21.50 per ounce level (which nearly happened yesterday), before turning back down and hitting that US$11.70 level.

The blue line shows the support from the 2011 triple low — the year that it peaked. It also acted as resistance in 2013. For this reason, we should see a fair bit of resistance around the US$23.90 level in the months ahead. If silver breaks through the green line, it must close above US$23.90 on a monthly basis to signal ‘game on’.

As I’ve been saying, when the financial meltdown hits, commodities — alongside stocks, precious metals, property, and bonds — should get a lot cheaper. In my view, everything should pull back during the initial stages of the panic.

The US dollar should surge — it’s the only true global safe haven — and this should put pressure on everything. When this happens, I plan to recommend the best resource stocks on offer. This should position you strongly for the next phase of the commodities bull market.

In the meantime, I plan to recommend the best speculative resource stocks. These stocks have made my readers huge gains this year, which I discussed in my FREE report, here. I have plenty of exciting speculative stocks on my watchlist.

In my view, there’s no better place to make big gains than in resource stocks this year. Both in quick speculations, and after the crash with longer term investments. That’s why I wrote the free report, ‘Three ‘Bounce-Back Mining Belters’ to Buy NOW’, which was published Saturday.

Implementing my top-down approach, I’ve found three resource stocks that could make you massive profits in the months ahead, despite market conditions.

To get your FREE report today, click here.

Regards,

Jason Stevenson,
Resources Analyst, Money Morning


Money Morning is Australia’s most outspoken financial news service. Your Money Morning editorial team are not afraid to tell it like it is. From calling out politicians to taking on the housing industry, our aim is to cut through the hype and BS to help you make sense of the stories that make a difference to your wealth. Whether you agree with us or not, you’ll find our common-sense, thought provoking arguments well worth a read. Money Morning Australia is published by Port Phillip Publishing, an independent financial publisher based in Melbourne, Australia. As an Australian financial services license holder we are subject to the regulations and laws of Corporations Act and Financial Services Act.


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