Transcription
I have been studying and analyzing silver for 25 years, its entire history. And this has never happened before in the silver market. And it's a pretty rare event in capital markets history. What am I talking about? Well, it's a couple things. It's not only is it the breakout from a 45 yearlong base, the only base in capital markets history that's longer than that was a breakout in gold at commodity prices in the early 70s. That those markets broke out from a 110 year long base. So other than that, this is a historic breakout for silver. That's why I call it the second greatest breakout of all time. So you have the fact that it's broken out to new all-time highs. And so there's really no good historical comp for that.
We can look at silver's history and we can look at this breakout here in 1973 which I have talked about and yes that was a significant breakout through the civil war peak here through the 1967 peak here. I'm not downplaying that. That was extremely significant. But that breakout was not from a perfect base. It was very unbalanced. But this breakout that we had recently, this is from a perfect base. I mean, look at this. This is a beautiful 45-y year long base. And so my point is this is the only historical comp, but it's really not a good enough comparison because it didn't break out from that clean of a base.
Also, I'd like to point out, this is important. Remember, this move right here was not that strong because you had a significant move in silver in the 1960s, the mid to late 1960s, which also precipitated a mania and junior silver stocks. I talked about that in my book. But that transpired because the gold price was fixed. You couldn't buy gold. And so this period here was, of course, when we came off the gold standard. And so this period you had a huge move in gold which is even bigger than the move in silver. And so that reason and also the fact that silver had this big move in the 1960s beforehand, that's why this move was not as strong in silver and why it's not necessarily a good comparison for where we are here and now. And so with that being said, this cyclical move that we've seen right here should be a lot bigger than this move right here. And I'll get more into that in some of these other charts.
So, next, let's take a look at silver against the stock market. And so, this is silver down here in light blue. Silver in nominal terms. And this is silver against the S&P 500. Silver divided by the S&P 500. The ratio here, the scale is inverted. It's actually in favor of the S&P divided by silver. But it's easier to look at the numbers that way. So, the numbers get smaller. as silver outperforms the S&P and it moves higher, the numbers get smaller. And so let's compare it to that early '7s period. So you have this move here from 72 to a peak of 15. In terms of the percentage decline, that's extremely significant. This move here from the 200s about 70 where we are now. And so you got from here to here dividing by three essentially or a little bit more. Whereas if you look at this move here from 73 to 15, I mean that's a divided by five type of move. So if you divided this by five, you would get to what 45 or something like that. So based on what we can see here, this cyclical move here really has more to go based on silver against the S&P 500.
Now next, let's look at the gold silver ratio. And again, we can see this peak here in 1973, the ratio is all the way down to 27, whereas where we are here and now, we're in the 60s. So we're still much higher. And as I said, this period right here, while it's a good comparison, not necessarily the best because remember in the 60s, silver was crushing gold because gold was fixed, silver was moving up. Then in the early '7, you had a rebalancing in the ratio as gold outperformed silver during this period right here. Okay.
Now, last thing I'd like to look at, and this is important, and this is a great chart from Callum Thomas. You got to follow him on Twitter. These ETF allocation charts are fantastic. And so this down here in red or is it orange? This is all the capital in silver ETFs divided by the capital in all ETFs. So all silver ETF assets against all ETF assets. Look at how much lower this is compared to 2011. I mean it's insane if people are comparing silver to 2011. So in the last four or five months or even 6 months we have seen a big move into silver. But people this is only like 0.5 or 0.55%. Look at where it peaked almost at 2%. And let's take a look at this. Even 2008, that little peak right here, that cyclical peak was called about 0.75%. So people, we've seen this right here, but again, it's below these peaks right here, well below the 2011 peak. And so with all that being said, that's why I don't think silver is at a cyclical peak.
So you have secular peaks which are this and this and then you have cyclical peaks. 2008 that was a cyclical peak. This was a cyclical peak here. This was a cyclical peak. And then you have intermediate term peaks. So again for all these reasons I don't see this being a cyclical peak. I see this being an intermediate term peak. And so intermediate term peaks in silver these can last anywhere from even over a year to three or four months. I mean it depends on price and time. Now, with my gold analysis, I'm looking at potentially another 3 months of correction for gold in terms of time. So, maybe that means another 3 months for silver. Maybe it means 5 months. Either way, I think the probability for silver is it will chop around for a good chunk of this year before the next move higher when it moves beyond 100. And so, that is what I'm seeing for silver. But this is a historic setup. This is historic action as an analyst because as I said this has never happened before in silver. This type of breakout never happened before in silver. Silver is in complete blue sky territory. And the only other time it happened in financial markets was in the early '7s in gold and commodity prices. So this is a historic time and there's not a lot of history that we can draw upon here.
So that's all for the video. Leave a comment. Let me know. So, do you think silver's in an intermediate term correction or will it be just a short to medium-term correction here? Would love to hear from you. And I'd like to wish everyone a happy St. Patrick's Day. I am 38 Irish and I have the attire to celebrate. I'll talk to you guys next in the Friday weekly market recap video. Thank you.