LIVE MARKETS-Silver staring at a steep climb

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SILVER STARING AT A STEEP CLIMB

The 25% "close to close" drop in silver XAG= was the third-largest daily decline going back to 1968, according to Ned Davis Research, with the only two larger declines taking place in March 1980, shortly after the metal reached its then-record high in January.

According to NDR commodity strategist Matt Bauer, the plummet last week also ended the 853-day streak in silver without a 20% correction, just shy of the 856-day streak that ended with the January 1980 apex.

Bauer said there have been four prior instances when such a streak broke in the wake of a record high, with the four largest drawdowns all starting from that peak. While Bauer acknowledges it is a small sample size, he believes there are some noteworthy conclusions and if the current stumble is similar to those past peaks, "silver faces an uphill battle, both literally and figuratively, to reclaim its all-time high."

Of the four prior instances that saw a 20% drop, each sees silver trend lower for the next 12 months, with the 1980 case being the most severe drop. Bauer said the current case falls closer to the 1980 case, but "whether that translates to symmetry for the 12 months following its recent high remains to be seen."

Bauer also notes that on average, it takes nearly seven years for silver to find a bottom after a 20% drop from a record high, with the average peak-to-trough decline almost 65%, and the average time to record a new record high just under 14 years.

That data is heavily skewed by the 93% drop over more than 13 years after the 1980 record, Bauer concedes, while also noting this may be different, but "if the current episode follows the general pattern of past cycles, silver may take years to bottom and years after that to climb to a new ATH."

(Chuck MIkolajczak)

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