The silver price has dropped to such low levels that, a year from now, traders will wonder why they didn’t buy some at such great prices. And if the price isn’t much higher a year from now, it must have been that politicians and central banks suddenly got religion and stopped debasing currencies.
But how likely is that? Who wants to be in an official capacity when the Bastille is being stormed by people all over Europe in one massive European Spring? Scarey stuff, indeed.
According to the silver chart, the price has approached very close to a meaningful support level of $26.15. A plunge below $26.15 most likely can only mean one thing: a John Taylor (of FX Concepts) scenario of complete financial Armageddon in Europe, riots, government overthrows in countries not typically in the radar of Western news, or maybe revolution in Greece, for example. Under that scenario, the gold price might hit $1,000, according to Taylor.
A collapsed euro would temporarily soar the dollar until investors jump ship from the greenback following the short-term knee-jerk reaction. Then the focus on the dollar begins, and the financial metrics aren’t any better in America.
Sounds too speculative?
Consider, in 1873, when the German property market collapsed and Austria demonetized silver, the ripple effect in the US was devastating. The 1873-1878 Depression in the U.S. and Europe was worse than the Depression of the 1930s, though very few analysts refer to that period as a comparison to today’s financial crisis; that period was too long ago.
In 1907, the banking system collapse in the U.S. following the failure of the Knickerbocker Trust Company caused stock market crashes in Europe, with Rome and Paris taking the biggest hit of approximately 50 percent drops in their major indices.
In 1921, financial turmoil post-WWI devastated both the U.S. and Europe, as well, but the Depression at that time was very short lived—approximately 18 months.
Then, the Depression of the 1930s. Ditto, both side of the Atlantic were crushed for more than a decade. Then, WWII came and went. The U.S. dollar was chosen as the world’s new reserve currency of the because the U.S. was the last man standing following the devastation of Europe.
Since the 1930s, recessions and currency problems have affected the U.S. and Europe like Siamese twins. Both sides of the Atlantic have been linked for centuries; and the suggestion that some how the U.S. won’t crater from a European debacle is just pure nonsense. As Europe goes, so goes the U.S.
Globalization is not a new concept; it’s very old.
Therefore, the Fed, ECB, the BOE, SNB and the BOJ can be counted on to work together to re-inflate when the time is right. Each knows the others are dependent upon the group. And that time to re-inflate is about right now.
According to the silver chart, this summer central banks will intervene, if not earlier and between FOMC meetings. That’s the time silver will most likely begin its journey to $50, and beyond. Patience and a long-term horizon is needed to outlast the day when markets have had enough with the broken monetary system and flee paper en masse. We’re not there, yet. However, time is on the side of silver investors. Hang in there and continue stacking.