Economic Times: Why Silver May See a Massive Rally After Underperforming for 6 Years

Article by Aasif Hirani in Economic Times

Silver is expected to witness a big rally. History shows that once silver gives a positive return in a year, it tends to stay in the green for at least two more years. This August, the bull cycle started in silver.

Silver prices moved below 50-MMA in 1988 and closed above it in 1993. The price at that time was $4.7. From there it made a high of $6.8 in 1998, giving a return of 44 per cent in five years. From 2000 till 2003 it remained below 50-MMA and then in 2004, it breached above this average around $5 an ounce. The price rallied till $21 in 2008 giving a return of 320 per cent.

In 2009, again prices closed above this average around $12 an ounce and rallied till $49 an ounce in 2011 giving return of 308 per cent in a span of two years. That is a massive return in any asset class in such a short period.

In 2013, silver price closed below 50-MMA and now finally in August, silver has price closed above this level.

Silver traded below 50-MMA for the period of 6.5 years (longer than historical average underperforming time). So we expect a minimum rally of 50 per cent.

Silver has already given breakout at $16 an ounce and is currently trading at $18, giving a return of 12.5 per cent in 2 months.

This is why we are bullish on silver from here on and expect prices to more than double in the next 2-3 years.

To read this article in Economic Times in its entirety and see the relating charts, click here.