It Begins. Silver is Signaling a New Explosive Stage

Silver & Gold Market Analysis - January 13th, 2024 - Vince Lansancy Interview

Key Concepts:

• Price Discovery: The process of determining the true market value of an asset, driven by supply and demand.
• Fractal Patterns: Recurring patterns observed at different scales within a market chart.
• Measured Move: A price target calculated based on the depth and length of a breakout pattern. (Depth = Distance)
• Mercantilism vs. Globalism: A shift in global trade dynamics from interconnectedness to regionalized, self-sufficient economies.
• HQLA (High-Quality Liquid Assets): Assets that can be easily and quickly converted into cash with minimal loss of value, often used for collateral.
• Comex & SLV/PSLV: Different avenues for investing in silver – futures contracts (Comex), Exchange Traded Funds (SLV & PSLV) with varying levels of physical backing and risk.
• ETF Disconnect: The potential for an ETF’s price to diverge from the underlying physical asset.
• Concentrate: Rocks with a high concentration of silver, requiring smelting and refining.

I. Market Overview & Silver Breakout

The discussion centers around the recent strong performance of silver and gold, particularly silver’s breakout above $50. Vince Lansancy highlights the lack of supply (no sellers) as a key driver of the price increase, characterizing it as “true price discovery” – a search for a price point where sellers emerge. He describes the current market movement as a “slow-motion explosion,” anticipating potentially significant gains, possibly a $50 increase in a short timeframe. Silver’s hourly chart shows a breakout with a potential measured upside target of around $94. Gold is also making new highs, currently at $2,600 as of the recording date.

II. Historical Breakout Significance & Ranking

Lansancy frames the current silver breakout within a historical context, ranking it as the second greatest breakout of all time. His ranking criteria are based on the length of the base (the period of consolidation before the breakout) and the significance of the breakout itself.

• Greatest Breakout: Gold in 1972, breaking a century-long base following the Civil War and the 1920s. The subsequent price increase significantly exceeded the measured upside target.
• Second Greatest Breakout: Silver’s current breakout from a 45-year base (since the 1980 peak and 2011).
• Other Notable Breakouts: The Dow Jones breakout in 1982 (from a 16-year base) and Gold’s cup and handle breakout in the previous year (from a 13-year base).

He emphasizes that while silver’s base isn’t the longest, its potential significance for the future of precious metals investing is substantial.

III. Technical Analysis & Price Targets

The discussion delves into technical analysis methods for determining price targets.

• Depth Equals Distance: The measured move is calculated based on the depth (vertical distance) of the breakout pattern, which is then projected upwards. For silver, this initially suggests a target of $96.
• Logarithmic Targets: Considering the percentage increase from the base, a more aggressive target of around $500 is suggested.
• Inflation-Adjusted Target: Adjusting for inflation to the 1980 peak yields a target of approximately $143.
• Convergence of Targets: Lansancy argues that the convergence of these different target methods (measured move, logarithmic, inflation-adjusted) around the $130-$140 range strengthens the likelihood of that level being reached. He leans towards the $96 target initially, but acknowledges the significance of the $130-$140 range.

IV. Geopolitical & Macroeconomic Drivers

Lansancy attributes the silver price increase not solely to technical factors, but also to significant geopolitical and macroeconomic developments.

• China’s Silver Policy: The narrative that China has stopped exporting silver is misleading. China isn’t exporting because it’s importing – the price is higher in China, indicating strong domestic demand.
• US Policy & Latin America: The US is actively restricting access to Latin American silver supplies, effectively hoarding the metal domestically.
• Global Fragmentation: A breakdown in globalization and a shift towards mercantilism are contributing to supply constraints.
• US Smelting Capacity: The US is importing silver concentrate from Latin America but lacks the smelting capacity to process it, leading to the construction of a new smelter in Tennessee.
• Middle East & BRICS: The development of tokenized silver products in the Middle East and discussions within the BRICS nations about using silver as collateral for HQLA are further bullish signals.
• Producer Hedging: Latin American silver producers are increasingly hedging their production further out in time, indicating a belief in sustained higher prices. Banks are actively encouraging this hedging, securing supply for themselves.

V. Mercantilism & Deglobalization

Lansancy elaborates on the shift from globalism to mercantilism, explaining how this impacts precious metals.

• Globalism: Characterized by interconnected trade and the dominance of the US dollar.
• Mercantilism: A return to regionalized trade, self-sufficiency, and the use of local currencies. This necessitates hoarding of physical assets like silver and gold.
• Regionalism Challenges: The current geopolitical landscape complicates regionalization, as existing alliances and conflicts create complexities.

VI. ETF Considerations: SLV vs. PSLV vs. Comex

The discussion addresses concerns about the safety of investing in silver through Exchange Traded Funds (ETFs) like SLV (BlackRock) and PSLV (Aberdeen Standard).

• Comex Risk: The Comex futures market is considered riskier due to its international nature and potential for manipulation.
• SLV as a US Government Tool: Lansancy argues that SLV serves as a vehicle for the US government to accumulate silver without directly appearing to hoard it. He believes SLV is safer than Comex.
• PSLV as a Superior Option: PSLV (physical silver) is considered a more secure option, as it is directly backed by physical silver. However, it is susceptible to manipulation through shorting and becoming a closed-end fund.
• ETF Disconnect Risk: The potential for an ETF’s price to diverge from the underlying physical silver exists, particularly if the US government were to “borrow” silver from SLV.

VII. Conclusion & Key Takeaways

Lansancy concludes that the silver price increase is driven by genuine price discovery, fueled by supply constraints and geopolitical factors. He anticipates a potentially explosive rally, with targets ranging from $96 to $140. He emphasizes the importance of understanding both technical analysis and the underlying macroeconomic and geopolitical forces driving the market. He recommends subscribing to his newsletter, Goldfix, for in-depth daily analysis. The current situation is described as a “war” for resources, with a shift towards mercantilism and a growing distrust of paper assets.

Resources:

• Goldfix (VBL): https://vblgoldfix.substack.com/
• Daily Gold: https://www.dailygold.com/
• Daily Gold Premium: https://www.dailygold.com/premium/