Bob Prechter on Silver
April 2, 2009
By Nico Issac
In case you hadn't noticed: Over
the past year of financial turmoil, the "safe haven" premium of precious metals
has offered about as much support as a rubber ducky in a tsunami. Despite a
string of powerful rallies, silver and gold remain well below their March 2008
It goes without saying that the
greatest opportunities in precious metals were not had by those who played the
"disaster hedge" card; but rather by those who timed the trends as they
developed, regardless of the fundamental backdrop.
Bob Prechter is in the latter
group. Amidst the buzz and whirl of the most bullish backdrop in precious
metals' recent history, gold and silver prices soared to new, all-time highs and
calls for a "New Gold Rush" and "$30 Silver" flooded the mainstream airwaves.
Yet Bob alerted subscribers to an approaching top in the March 14, 2008
Elliott Wave Theorist.
"The wave count [in silver]
is nearly satisfied, though ideally it should end after one more new high. If
this analysis is accurate, and silver does peak and begin a bear market, gold
is likely to go down with it."
In the days that followed, prices
in both metals fell off a cliff. In turn, Bob was asked to address his
exceptional call for a turn down in a March 19, 2008
Bloomberg interview. Here are of excerpts from that conversation:
Bloomberg: "Why did you put out
that call on Friday (March 14) about a peak in precious metals?"
Editor’s Note: You can
download Bob Prechter’s 5-page report,
Gold & Recessions, free from Elliott Wave International. It features 63
years of historical analysis that reveals how gold, T-notes, and the DJIA have
performed in recessions and expansions.
Bob Prechter: "One of the
reasons is that it seemed like an absolutely sure thing. We track several
indicators of sentiment. One of them is the Daily Sentiment Index (DSI). That
reached 98% bulls on a one-day basis going into this last high. We were tracking
silver as well… as it is clearest in our minds. Now, at the time, we needed one
more slightly new high. That happened Monday morning and silver dropped 15% in
48 hours. That's a heck of a reversal and I think it's real."
"Real" indeed: From their March
peaks, gold prices plummeted 34%, alongside a 60% sell-off in silver before
hitting the breaks in October. Here, the October 2008 Elliott Wave Financial
Forecast prepared for a corrective rebound and wrote:
"Silver traced out a
five-wave decline from its March peak…Gold should also rally as silver pushes
higher. Once silver's rise is exhausted (initial target: $15.15), the larger
downtrend should resume for both metals."
A powerful, four-month bounce
ensued in both metals: Gold prices came within kissing distance of its March
peak before turning down on February 20; silver followed suit -- a fulfillment
of this bearish, near-term insight presented in the February 23 Elliott Wave
"Silver has been clear as a
bell. Silver is due to turn back down, and gold, which is back at $1000/oz, is
likely to follow."
Since then, it's been a steady
march lower for both metals. Obviously, EWI's forecasts do not always prove this
accurate. Yet in this case the analysis speaks for itself.
For more metals analysis from Bob
Gold & Recessions a free 5-page report from Elliott Wave
International. It features 63 years of historical analysis that reveals how
gold, T-notes, and the DJIA have performed in recessions and expansions.
Robert Prechter, Certified
Market Technician, is the founder and CEO of Elliott Wave International author
of Wall Street best-sellers
Conquer the Crash and
Elliott Wave Principle and editor of
The Elliott Wave Theorist monthly market letter since 1979.