slickeast wrote:I just went back and read the posts on the ride to $49. That was an exciting time. It reminds me that when it is going up, we dont know how far it will go before it falls off a cliff.
This is an over-simplification, but presents an idea. If you consider that gold and silver are in a long-term correction...
Except for times when the rules change (re-valuation, discussed later) the nature of stable corrections (which is the PM path for the past 10 years) is (on average) a straight line. Unstable corrections (irrational exhuberance, etc) that differ sharply either up or down eventually get pulled back to the trend line. If you look at a long-term data and use your imagination (in lieu of a curve fit) we've been below the line and have now corrected close to where one might argue we should be.
Gold is still under its trend line - should be $1800 and moving at $300/year if this idea stayed consistent.
Silver has been more "moody" and you can imagine several trend lines, but I would argue we should be at least 33-34 moving at a rate of $3-$4 per year, and more likely $36-37 moving at a rate of at least $6-$8/year. I wouldn't get too excited about a short-term correction back to the line until we hit $40+.
All the above presumes no "black swan". If PMs get revalued, we could easily see a "step-function" change to a new value for both. Some might call that going parabolic or "exponential", but in fact there can be two types of adjustments. One a semi-step function where PMs are simply revalued up (perhaps by a factor of 3 to 10). The second would be the resulting follow-on panic where it then goes parabolic for a short time. The second type would then crash back to the new, higher, trend line.
It's possible that silver could be re-valued independent of gold, and without other events, if it becomes knowns that prices were being manipulated and we are actually in a period of physical shortage. That could result in a near-instant re-valuation of silver to (say) $60 and a rate of increase of $20/year - a new trend line. Again, this would not be the "parabolic" move that some talk about, but a re-valuation.