By Hubert Moolman
The silver price and the US Dollar/South African Rand exchange rate (USD/ZAR) have a very interesting relationship that goes back a long way.
Basically, in the long run, the two move in opposite directions. When the USD/ZAR rate is moving up, then the silver price is moving down, and vice versa. Furthermore, when the USS/ZAR rate is making a top, then a bottom in silver is normally very close (before or after the USD/ZAR peak).
Due to the nature of this relationship, I find that the USD/ZAR chart is often a leading indicator for a silver bottom as well as a silver rally.
Then – It signalled the bottom
Earlier this year, the USD/ZAR chart signalled the fact that the December 2015 low in silver was actually the bottom for the 5-year decline. This, from my February 2016 premium service (in italics):
Below, is a comparison showing the relationship between USD/ZAR peaks and silver bottoms:
On the chart (from tradingview.com), I have drawn blue lines at the 2001, 2008 and potential Jan 2016 USD/ZAR peaks. One can see how close to these peaks the 2001, 2008 and potential Dec 2015 silver bottoms were.
Given, the look of the Jan 2016 candlestick; it is likely that the USD/ZAR chart has peaked.
If it has indeed peaked, then there is a very strong likelihood that the December 2015 bottom in silver is actually the bottom since the 2011 peak. It is interesting to note that there is a 7-year interval between the silver bottoms.
Now – it signals a rally similar to that of August 2010 – April 2011
Below is a USD/ZAR chart from 2004 to 2016 (from tradingview.com):
On the chart, I have marked two significant peaks (October 2008 and January 2016). Silver also made a significant bottom around the same time during both peaks. The USD/ZAR had a significant breakdown in July of 2010 as indicated. This was followed by a significant silver rally that really took off around the end of August 2010.
The USD/ZAR chart recently had a similar breakdown as indicated. This tells me that silver will soon spike significantly higher. This fractal analysis of a previous article also suggests that silver is close to a significant spike.
For more of this kind of analysis, you are welcome to subscribe to my premium service. I have also recently completed a Gold Mining Fractal Analysis Report as well as a Silver Fractal Analysis Report.
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