Where Are We in the Psychology of the Silver Market Cycle?
This article looks at the phases of investor psychology in market cycles. Then compares these phases to the silver market cycle over the past 8 years or so, to see where the silver market is currently. Therefore helping to indicate where silver is going from here and aiding with deciding when to buy silver…
Psychology of a Market Cycle
This infographic from cheatsheet.com clearly spells out the emotions and feelings that investors experience as a market fluctuates. From depression at the very bottom of a market to euphoria at the top.
This got us thinking where are we in the psychology of the silver market cycle?
The Psychology of the Silver Market Cycle
Silver has not exactly been the outstanding performer in recent years. But it was a different story in the years leading up to 2011. So if you’ve been holding silver since 2011 you’ve possibly been through a roller coaster of investing emotions.
We’ve got an 10 year chart of silver in New Zealand Dollars below. Upon this we have added the emotions that silver buyers may have been through since 2009. These phases are inspired by the above infographic.
You can see that silver in New Zealand dollars has just about followed the cycle of emotions exactly since 2009.
From Disbelief that we were seeing a real rise, after silver fell in price in early 2009. Rising through the emotions of Hope, Optimism, Belief and into Thrill and Euphoria in 2011 as silver peaked.
Then we went through Complacency later in 2011, as silver rose after the initial sharp fall. Followed by Anxiety as the plunge resumed. Then Denial, Panic and Capitulation. Before silver bottomed out in late 2015 with Anger.
Silver Still in Depression?
More recently we’ve been in the Depression phase, even though the bottom most likely already occurred in 2014.
We have seen the silver price rise since the 2014 low, but only in a slight uptrend. This uptrend has been further obfuscated by the fact that silver fell in 2016 and since then really just moved sideways. While silver hasn’t made a new major low, it certainly hasn’t reached a new high for over 2 years.
Therefore most people don’t believe silver will ever manage to rise much higher.
So with the benefit of hindsight we’d say we are not yet in the Disbelief phase (as we thought we might have been back in December 2017). But for now silver is still mired in the Depression phase.
Given how poor the sentiment still is towards silver, even though the price looks to have bottomed out, this Depression phase looks like a pretty good guess currently.
(For more on the topic of precious metals cycles see: Gold Cycles vs Property Cycles: When Will Gold Reach Peak Valuation?)
Where to From Here for the Silver Cycle?
So that was the psychology of the silver market cycle from 2009 to 2018. Where to from here for silver?
Disbelief to Come Next for Silver?
Well if we are currently still in the Depression phase, then we may be due a decent rise in price to push us into the Disbelief phase.
This phase – from Depression to Disbelief – is often where some of the biggest gains are made too.
Because Disbelief simply means that the rise in price is not expected to be sustainable. So there are few people “on board” as the majority expects the rise to be temporary.
We also currently have the very unusual position in the silver futures market, where the commercial traders (the “smart money”) are net long for the first time in the history of the data! So the “smart money” (being the silver miners, traders and dealers) who are always short silver to hedge their exposure, are now for the first time ever betting on the silver price to rise.
Read more on the significance of this: Gold and Silver Commitment of Traders (COT) Report: A Beginners Guide >>
So we are potentially about to enter the phase in the silver market cycle where, after going nowhere for a while, we instead see a sustained rise in the silver price.
Therefore also making now a solid time to buy silver such as the Canadian Silver Maple. See here for a deal on those >>.
Or for more help in deciding when to buy silver (or gold) see: When to Buy Gold or Silver: The Ultimate Guide >>
Editors Note: This article was first published on 12 December 2017. Updated 3 October 2018 with new “Psychology of the Silver Market Cycle” chart. Change from Disbelief to Depression phase and Silver Commercials “Net” Positions chart added.