-- Posted 27 March, 2011 | | Discuss This Article - Comments:

Any investor in silver must have found the past six months pretty exciting. This precious metal has more than doubled in that time. The pessimists see a high flying price heading for a fall, and they did so last autumn before this take-off.

For other chartists this increasingly looks like a repeat of the 1978-80 silver price blow-off with a super spike to $50, a price that has still yet to be achieved 31 years later.

Gold marking time

Gold has yet to make this sort of price breakout and still seems on a steady uptrend:

It is silver that has the most exciting price trend developing. Of course this carries a huge red warning for volatility. This is not a straight line movement. The ups and downs can and no doubt will be formidable. Silver crashed 52 per cent in late 2008 below $10 but then bounced back magnificently.

Silver breaks out

However, just look at the five-year chart for the shiniest of metals:

You indeed have two possible conclusions: that this is the spike almost over; or that this is the base for a parabolic upward price movement. Going sideways from this sort of chart would be highly unlikely.

What we really need to confirm an imminent price spike for silver is for gold to also breakout of its current range of $1,400-1,450.  And it is increasingly clear that this is about to happen, either after a global financial market correction or very soon if nothing happens to bring markets down.

Inflation

For none of the fundamentals supporting higher precious metal prices show any sign of going away. Should the $246 billion cash injection by the Japanese Central Bank not be considered as QE3? It is certainly another vast liquidity injection, and a rise in the supply of money is always followed by inflation.

Then what of the instability in the Middle East? We hear Gaddaffi has 150 tons of gold in Tripoli to fund his civil war, and that Iran has been cashing out of dollars and into gold for many years. All over the world the rich are buying gold and silver to protect against inflation and political instability.

It is indeed rather like the late 70s with the multiple oil shocks, central banks printing money and revolution in the Middle East. Even the 2008 price crash for gold and silver looks like a repeat of the 1976 mega-correction, and if so that puts us in 1979 today just before the great spike.

ArabianMoney tipped $320 silver last September (click here).