Silver mania: Signs that a surge in silver prices is coming

Conventional wisdom would say that now’s the time to sell your silver. In fact, there are signs that’s silver’s setting up for another major upswing.

It’s hard to argue that the silver market isn’t weak right now. Silver stockpiles haven’t been this high on the Comex for more than a decade. On Monday, Citigroup Inc. (NYSE:C) sent a note to investors arguing that silver prices will likley fall 10 percent to $27 an ounce in 2013.

The COMEX lowered margin requirements for silver for the second time since February. Worst of all, silver prices have plunged more than 10 percent since the start of March.

And yet, there are signs out there that we’re at an inflection point for silver prices.

“Gold and silver are very close to entering the mania phase of this bull market,” writes Hubert Moolman at ResourceInvestor.

Moolman’s laid out some interesting charts showing that silver chart patterns today look eerily similar to the same patterns we saw before the white metal hit an all-time high in 1980. They also look like the chart pattern we saw in gold prices when gold hit a new all-time record in 2008 (click for the originals):

Moolman points out that in order for silver to enter a mania phase, cash (and lots of it) is going to need to flow out of a different asset class. His prediction is it’ll flow out of stocks and into metals. That’s what happened in 2007/2008, and – if you’ll recall – stocks were hitting all-time highs around that time; just as they are today.

Of course, we can’t rule out political influence on the price of gold and silver. With the upcoming presidential election in November, Chris Marchese, a contributor to The Morgan Report, believes “Bernanke will do everything in his power to make Obama look good to get re-elected.” That – along with the debt-fueled recovery we’ve been spoonfed – prompted Marchese to make calls of silver spiking as high as $70 an ounce this fall.

Buying into weakness is one of the toughest psychological hurdles in investing. It’s also a great way to make money so long as you do with discipline, a firm plan and padding in your bank and brokerage accounts to weather the inevitable setbacks. You want to buy silver when no one else is. And, if you’re worried about prices for silver that you’ve already purchased, just take the long-term view: gold and silver have been money for thousands of years. That’s not going to change anytime soon – no matter what the pundits say.

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