Coronavirus - The Chinese Emperor Has No Clothes!
One of the worst places for a pandemic to begin is from within a totalitarian state as local party minions tend to be too scared to pass bad news up the chain of command, and obediently wait on orders from leaders residing many hundreds of miles away, by which time it's too late where virus's are concerned, and so it has been with the Corona virus outbreak in China. Don't be fooled by Chinese state propaganda of panic building of hospitals, chinese communist party bureaucracy ensures that it is already too late! The Corona virus has spread throughout China!
I am sure you have all seen news footage of deserted Wuhan streets. Though none of the news reporters appear to have put 2 and 2 together and worked out the reason why the streets are empty is because most of the people living there have already FLED the city, taking their Corona virus infections with them! TOO LATE, OUT OF CONTROL!
How bad could things get? Well 2,700 infected and 96 deaths that we know of in just over a month (actual number may be closer to 50000 infected). Now compare this to the 8 month SARS outbreak between November 2002 and July 2003 that resulted in 8,098 infections and 774 deaths that had a 9.6% fatality rate.
Whilst for the Corona virus we don't know how many deaths there have actually been or how many are really infected as the actual number is likely far higher than Chinese Government propaganda.
The official statistics (96/2700) suggest a fatality rate of 3.5%, about 1/3rd of the SARS virus. So likely under reporting of the actual number of deaths.
However, the Corona virus is far more infectious than SARs, how bad?, a "HOLY MOTHER OF GOD" BAD!
Given the exponential rate of spread of the virus, then by the end of February 2020 as many as 1 million people could be infected globally, that at a 3.5% fatality rate would result in 35,000 deaths. Though the true fatality rate will likely be significantly higher, and likely the virus has already spread to most nations (including Britain) given that approx 1 million Chinese students have traveled back to foreign Universities after the New year holidays.
A lesson from nature, don't EAT CATS and DOGS! Never mind wild BATS! Barmy Chinese diet asking for trouble!
If the above starts to pan out over the next few weeks then the market will increasingly discount future economic impact of a Global Pandemic i.e. flight to safety so supportive of Gold and Silver whilst implying lower stock prices.
In part the Dow and other stock market indices have already started to discount Pandemic consequences, though the trend is in line with my expectations for 2020 (Stock Market Trend Forecast Outlook for 2020).
So a potential AI mega-trend stocks buying opportunity. Though stock sectors likely hardest hit will be travel, tourism and retail.
And of course the Chinese stock market is paying the biggest price for the consequences of a totalitarian state's failure to act in time.
Youtube version -
Silver Price Trend 2019
We can all dream about SIlver outpacing Gold. However, the truth about Silver is that it tends to under perform during precious metals bull markets, and only really coming alive in the bull markets final stages when it tends to spike. So Silver for 2019 did what Silver tends to do which is to under perform against Gold. Though in reality maybe investors tend to set their hopes too high, as a gain of 15% for the year is still pretty good going against Gold up 19%.
(Charts courtesy of stockcharts.com)
Two things stand out about Gold's more volatile cousin -
1. Silver actually trended well during the year, that's normally not the case i.e. Silver is prone to giving lots of false signals. But not for 2019, we got a clear signal early June on break of the main down trend line. Similarly the break of support trendline late September signaled weakness ahead, though followed by a fake break higher during Late October, with the actual break pending until Mid December.
2. That Silver's December rally was a lot weaker than Gold's which set new bull market highs, whilst Silver has yet to break it's 2019 high of $19.75. Which reminds that the norm is to expect Silver to under perform the Gold price most of the time, regardless of what the ratio and indicators are saying about how cheap Silver is.
Still 15% IS a good return for buy and hold investors. Whilst traders need to be aware of Silvers volatile nature that makes Silver a tough market to trade.
Recap of my 3 Silver forecasts of 2019
Analysis of 11th June concluded in updated expectations for 2019 Silver Investing Trend Analysis and Price Forecast 2019 for a bull run to at least $18.50.
Silver Price Trend Forecast Conclusion
Therefore my forecast conclusion is for the Silver price to continue to trade in a volatile trading range with an upward bias towards a target of $18.50 later in 2019 as it steps higher into each successive trading range i.e. $15.25 to $16.25, then $16.25 to $17.30, then $17.30 to $18.50, which would represent a 25% gain on it's current price of $14.74. Whilst a spike to at $35+ remains a longer term objective.
Whilst my update of late July Silver Investing Trend Analysis and Price Forecasts 2019 Update expected a volatile bull run to continue along with the Gold price for Silver to at least target $19 and then $21. With the subsequent $19.75 high placing Silver mid-way between my 2 targets for 2019.
Silver Price Trend Forecast
The Silver price continues to target my 2 primary resistance targets for 2019 of $19 and $21. Once we reach and break those levels then we will know what to expect beyond $21. With the following graph illustrating the expected central trend trajectory for the Silver price, baring in mind it is a volatile commodity.
Whilst my last look at Silver on the 31st of October (Silver Trend Forecast 2019 Update - Nov to Dec 2019) expected the then correction to resolve in a sharp rally following the Gold price to new highs for the year.
Silver Price Trend Forecast
The Silver price having achieved my first primary target of $19 for 2019, now continues to target my 2nd primary target of $21 before the end of this year. Once we reach and break that level then we will know what to expect beyond $21. With the following graph illustrating the expected central trend trajectory for the Silver price, baring in mind this is a volatile commodity.
Subsequently Silver only just managed to rally to end 2019 to $18 after slumping to a early December low of $16.57, greatly under performing the Gold price.
Silver Investing Strategy
Firstly, my long standing approach to Silver has been one of buying (accumulating) when the Silver price is cheap to invest to capitalise on long-term Spikes, as the silver price tends to be quite erratic in behaviour, prone to a lot of false signals so Silver can be a difficult market to trade i.e. tends to run stops and sharp movements contrary to the likes of Gold, just as we have experienced during Summer 2019, with the bulk of the silver moves taking place towards the end of precious metals bull runs as illustrated by my analysis of May 2018 investing for a $35+ Spike.
In terms of a Silver market position then as is currently the case the silver market can usually be expected to be a dead market with the tendency to flat line not just for many months but even years as it tends to play second fiddle to Gold in terms of tradable swings, usually only really coming alive towards the latter stages of precious metal bull markets.
Which remains my long-term target for a Spike to +$35, at which point I would consider distributing (selling) holdings.
Gold Price Trend Forecast Implications for Silver
My recent Gold price analysis (Gold Price Trend Forecast 2020) concluded in mild first few months of the year to give way to a strong Bull run from Mid April to target a trend towards $1800.
Were Silver to follow a similar trend then expect weakness over the next few months followed by a delayed rally to the Gold price moving higher towards a Gold converted target of $21 late 2020.
Gold / Silver Ratio
The Gold / Silver ratio hit an extreme high of 95.11 early July 2019 when Silver was a SCREAMING BUY that sent the Silver price rocketing higher and the ratio sharply lower to 78.92 by early September. Though still cheap relative to Gold given the long-term average of 50.
However, investor interest in Silver soon fizzled out which sent the ratio back up to a relative high of 88.67 that illustrates that Silver's run higher was mostly as a consequence of speculative interest rather than investors buying where subsequently the ratio has been stuck in a trading range of $89 to $83.
So basically Silver remains CHEAP relative to Gold pending investor interest that 'should' see Silver trade to a ratio of at least 79 to Gold this year which on the current Gold price converts to $19.75 against last close of $17.46. And if Silver moved to a ratio of 79 timed with the Gold target of $1770 then that would convert to $22.40 or a gain of about 24% on the year. Whilst the current ratio of $89 would convert to $20.
Overall the ratio remains bullish for Silver and targets 79 for 2020 which suggests to expect a Silver price high of between $20 and $22.5 for 2020.
Longer-term, a ratio of at least 55 will likely accompany the anticipated Silver spike to $35+, where say Gold trading at $2000 / 55 resolves to a Silver price target of about $36.
Long-term Trend Analysis
Silver faces very heavy overhead resistance all the way to $21, which means that it is going to be tough going to take significant effort for Silver to reach let alone breach $21. Whilst there is strong support in around $16, so downside appears more limited than the upside.
Therefore the long-term chart warns to expect Silver to mark it's time before it manages to break above it's 2019 high of $19.75 to target a trend towards $21 that it may fail to reach during 2020.
What happens if by some miracle Silver manages to break above $21 during 2020, well then it would target a trend to $25.
This chart illustrates that Silver tends to spend more time drifting lower / sideways then trending higher. So expect short sharp rallies punctuated by periods of drift. Which is where we appear to be finding ourselves after the failure of Silver to clear $19 at the start of the year, greatly under performing the Gold Price.
The SIlver price currently finds itself deep in a choppy trading zone of between $16.50 and $18.50. With little sign that Silver is ready to resume it's assault on $19.75 any time soon. So we may see silver drift lower all the way to $16.50 over the coming months.
Whilst the upside is first limited to $19, then $19.75.
MACD - MACD wasn't particularly overbought at the end of Januarys rally, but now appears to be trending lower into negative territory for at least the next couple of months towards trendline support.
Elliott Waves - Look very bullish. i.e. we are in Wave 2 of at least a 5 wave advance, so is contrary to the bulk of this analysis. Note this elliott wave pattern dates back all the way to June 2019, so has proved reliable so far. Implies Silver could bottom within the next couple of weeks rather than the a couple of months or so.
Formulating a Trend Forecast
Silver is correcting with heavy support from $16.50 to $17.50 that should slow and eventually halt Silvers current decent. So as is the case for Gold, downside appears limited. But Silver IS a more volatile market i.e. prone to giving false signals, so don't discount that there could be a temporary spike lower, to run the stops so to speak which is why Silver tends to be a difficult market to trade.
Whilst on the upside, there is VERY heavy resistance, all the way from the recent high of $18.90, then to $19.75, which means it's going to be a very choppy and dirty trend on it's way to $20.
On the plus side, Silver is CHEAP relative to Gold, so every time speculators do the maths they'll tend to pile into Silver resulting in a rally of sorts. Then it's up to whether momentum can clear resistance before the speculators bail on failure to entice precious metals investors to buy.
However, I do expect Silver to eventually clear $20 and enter it's target zone of $20 to $22 for the year, to likely target resistance at $21.
Silver Price Trend Forecast 2020
Initially I am expecting a very volatile trading range between a low of $16.50 to a high of $19 for the next 3 months or so, following which the Silver price 'should' respond to a Gold price rally and follow the yellow metal higher. The trends not going to be pretty but I expect Silver to trade above $20, and likely reach a peak near $21 later in the year as the forecast graph illustrates.
The bottom line is that Silver is in a 6 year long trading range of between $21 and $14. And we are all waiting for the breakout higher. For which there is a low probability of happening during 2020. However, my long-term expectations remain of being invested for a spike to $35+, which on the current price would represent a gain of 100%.
So the strategy is to invest in Silver rather than to trade Silver, to accumulate when cheap and given the gold / silver ratio of 89, Silver is still cheap today relative to Gold. Just remember Silver tends to under perform Gold during most of the precious metal bull markets, and tends to outperform towards the end of powerful bull runs as retail investors start waking up and start jumping on board, hence expect a series of spikes higher through resistance levels over the coming years.
Risks to the Forecast
That Silver's rally comes later in the year i.e. starts later than June. And if Silver manages to break above $21 then would next target $25.
Disclaimer, I am invested in Silver (SLV)
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