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Analysis | Elliott Wave | Written by Elliott Wave International | Mon Sep 15 08 18:15 ET

Precious Metals Special: Part One

Imagine if an alien spacecraft landed on planet Earth in March 2008 to observe the daily dynamic of Wall Street. This is what they take away:

Leaders say precious metal prices are set for outer space on lasting "safe haven" appeal. Headlines read: "Get Ready For $2000 Gold" and "$50 per ounce" Silver.

Six months later, the same U.F.O. returns to check the outcome of events. Their Martian mouths drop open: Gold has plunged 27% to a one-year low, while silver has lost nearly half its value in a violent selloff to two-year lows.

Net conclusion: Earthlings = Un-Intelligent Life Forms.

OFF the radar, however, a different side emerged entirely. See, while a bearish bullion forecast was completely "alien" to the financial mainstream back in March -- it was every bit familiar to Elliott Wave International's team of analysts. This achievement is the focus of a special, three-piece study on Precious Metals. Today, we introduce part one: Seeing Silver's Slide Before It Began.

In early spring '08, silver prices were orbiting a 27-year high of $21 per ounce. And, according to the mainstream pros, the red-hot streak in white metal was just getting started. See list below of news items from the time:

  • "Silver's bull market has caught up and now will outperform gold going forward. $50 silver is very much so a possibility over the coming years." (DJ MarketWatch)
  • "Rather than indicating the formation of a speculative bubble, recent price action and market conditions indicate that silver is in the early-to-middle stages of a secular bull market." (Resource Investor)
  • "We remain bullish in the outlook for silver prices. The overall supply/demand fundamentals appear to remain strong." (CEO of world's largest silver mine)

(How Low Will Silver Go? The September 2008 Financial Forecast Service offers the most comprehensive and objective insight into the near-and-long-term trend changes in store for precious metals. Get the complete package today.)

While the in-crowd saw no limit to silver's upside potential, though, our analysts suggested the metal's shine was about to be snuffed out. Here, the following archive of our past publications goes down the line:

March 2008 Elliott Wave Financial Forecast: "Silver's [optimistic] extremes are even more pronounced. This is the type of condition that coincides with blowoffs and creates market tops. The downward reversal should be as violent as the upward spike now underway."

March 14 Elliott Wave Theorist: "Silver has met its resistance line on arithmetic scale and bulls outnumber bears so lopsidedly. The wave count is nearly satisfied. If this analysis is accurate, [then] the economy is on its last legs and the precious metals are nearing a top right along with it."

Two days later, silver prices hit their peak and began a lengthy period of downward consolidation. The point of no return finally came in mid-summer. The July 2008 Elliott Wave Financial Forecast was well prepared and wrote: "Silver is correcting the entire five-wave rally from… 2001. A minimal retracement of the rise from the 2001 low is $12.71, although there is greater bearish potential."

The markets 47% plunge from its March 17 peak speaks for itself. Make the truly "Intelligent" decision. Subscribe risk-free to the full Financial Forecast Service today.

(Editor's Note: Stay Tuned for Part Two of EWI's exclusive Precious Metal's study: Silver, the "industrial" side. )

Elliott Wave International

 

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