"Manias are episodes of relentless financial speculation that involve substantial infusions of credit, wide public participation, and which drive values to unprecedented levels."
Conquer the Crash, 2nd edition, p. 79
Could the relentless rise in silver that began in 2009 be categorized as a mania?
Well, consider that silver was trading between $10 and $12 an ounce during the first days of 2009. By April 25 of this year, prices had reached $49.79! In little more than two years, the price of the "poor man's metal" nearly quintupled!
Dear reader, if you believe that describes a mania, I'm with you.
Indeed, the precious metal's near-vertical price rise was akin to other manias, in the distant and recent past. See the chart below:
At a glance you see how Japan's Nikkei, the Nasdaq, and the Shanghai Composite all "returned to earth."
Is that what's ahead for silver? Could prices fall back to early 2009 levels -- or below?
I can say this: EWI's Robert Prechter undertook a study of financial manias some years back. He discovered that "declines following manias always carry below the starting point of the manias."
Since its all-time high this past April, silver's price has already fallen by about one-third.
EWI's Senior Metals Analyst Mike Drakulich is the editor of our
Metals Specialty Service. In a recent interview with
Kitco News he called silver's rally into the April 25 high, a "classic, parabolic, fifth-wave blow-off peak."
Does Drakulich anticipate a counter-trend bounce higher in silver, or does his analysis suggest more to the downside?