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…
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?
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 8 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. More recently we’ve been in the Depression phase, even though the bottom was already likely in. This saw the price rise slowly off the bottom.
Then since early 2016 we’ve likely been in the Disbelief phase again. Where silver has overall been in a slightly rising trend but without showing any real conviction. Therefore most people don’t believe it will ever manage to rise much higher.
(For more on the topic of precious metals cycles see: Gold Cycles vs Property Cycles: When Will Gold Reach Peak Valuation?)
So that was the psychology of the silver market cycle from 2009 to 2017. Where to from here for silver?
Well if we are currently somewhere in the Disbelief phase, then we are likely soon due a decent price rise to push us into the Hope phase. Given how poor the sentiment still is towards silver, even though the price looks to have bottomed out, this disbelief phase looks like a pretty good guess.
This phase from Depression to Disbelief is where the biggest gains are made from too.
On top of this if you look back at the end of the last 3 years in the chart above, silver has dipped lower during the month of December. But silver has then moved higher in the new year. Given we have also seen the price of silver falling this month, then perhaps we’ll see the last few years history repeat itself.
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