$26 Near-Term Silver Target by Prophecy Chairman John Lee

Nov 7, 2016 by John Lee, CFA (https://twitter.com/johnlee25893955?lang=en)

Three months ago on August 8, 2016, I wrote an article titled: “Gold to Thrive in a Fiat Ponzi with Negative Yield” in which, I presented the following charts and said “Why would you want to own yen or euros with negative yield, when you can own gold? – the real money. As an added bonus, there is no quantitative easing (QE) with gold…

It took gold approximately 7 months to advance $250 and overcome major resistance at $1,300/oz from a bottom of $1,050. A reasonable target could be $1,550/oz ($1,300 + $250) by March 2017 – 7 months from now. Silver could follow a similar pattern with a near-term target of $26/oz.”

chart from August 8 article


August turned out to be a short-term peak for silver. Silver staged a multi-year break out in July and is currently resting on the 5-year support trend line of $18. This is not unexpected given it had a 50% run up to a high of $21 from a January low of $14, while the Comex speculative long and commercial short positions were at an unprecedented extreme, some of the excess optimism had since been worked off.

Looking ahead, I offer you the following 2, 5, 15, and 100-year silver charts and conclude the article with my near term silver price target.

The 2-year chart shows silver broke out of the 2-year resistance level of $17.50 to reach $21 in July, and has since fallen back to $17.50, which is now the new support level that also happens to be the 200-day moving average (200 DMA). It’s highly unlikely for silver to fall below $17.50 with $21 as the next target level.

The 5-year chart shows the important trend lines of $18 and $26. Silver needs to stay above $18 to confirm the breakout, with the next major target level of $26.

The 15-year chart clearly shows that in early 2016, silver broke out of the 5-year consolidation that started in 2011, and is now embarking on a new phase that appears to be a major bull run. Silver subsequently broke out of a major multi-year resistance level of $19 in July 2016, and should stay above $19 to confirm the uptrend.

from http://www.macrotrends.net/1470/historical-silver-prices-100-year-chart

This 100-year silver chart shows silver is now testing the important 2-decade resistance level of $20. Once overcome, the next target levels are $25 (4 star), $30 (5 star), and $35 (6 star). If history is any guide, those target levels can be reached within months after silver definitively breaks out of the $20 level.

To quote again from my August 8 article:

“In the unlikely event that the global economy miraculously recovers and the Fed quadruples the Federal Funds rate from the current, miniscule 0.5% to say, a tiny 2% in short order, dividend stocks would crater, and US bond prices would crash with hoards of speculative liquidity and baby-boomer savings looking for a safe haven – not exactly the recipe for a gold bear market.”

Either way (hike or no hike), there is no place for the gold (and silver) bull to hide.

Technically, the silver bull is intact and within 10% of assailing the all-important $20-$21 target level. It needs to stay above the 200 DMA of $17.50 and let the rising 200 DMA carry silver over the magic $21 hurdle. My silver target (set in the August 8, 2016 article) of $26 by March 2017, remains a distinct possibility. I will update you when this moment happens – in the meanwhile, sit tight and enjoy the ride.

I own physical silver and chair the board of Prophecy Development Corp. (TSX: PCY) which is developing the Pulacayo mining project with over 20 million oz of indicated silver resource. I own 22.75% of Prophecy.

All currencies are expressed in US dollars.

John Lee, CFA.
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John Lee, CFA is an accredited investor with over 2 decades of investing experience in metals and mining equities. Mr. Lee joined Prophecy Development Corp. (www.prophecydev.com) in 2009 as the Company’s Chairman. Under John Lee’s leadership, Prophecy raised over $100 million through the Toronto Stock Exchange and acquired a portfolio of silver assets in Bolivia, coal assets in Mongolia, and a Titanium project in Canada. John Lee is a Rice University graduate with degrees in economics and engineering.