Crude Oil & Silver Price – Interesting Parallels

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CRUDE:

Crude Oil bottomed (weekly data) about 12/25/1998 at $10.75.  It rose erratically for several years, hit another low on 8/24/2007 at $68.70, and then rallied dramatically to an all-time high of $147.20 on 7/11/2008.  Subsequently, crude collapsed to $35.35 on 12/26/2008.

crude price july 2013 price

SILVER:

Silver bottomed (weekly data) about 11/23/2001 at $4.01.  It rose erratically for several years, hit another low on 2/5/10 at $14.78, and then rallied dramatically to a nearly all-time high of $48.58 on 4/29/2011.  Subsequently, silver collapsed to $18.53 on 6/28/2013.

silver price july 2013 price

SO  WHAT?

Both crude and silver took about 9.5 years to rally from a significant low to an important high.  The high to low ratios were similar – over 13 and over 12.  Both collapsed after their blow-off highs and fell 76% and 62% from their highs.  Crude rallied during the next four years and is now over triple its crash low.  Silver, a much smaller and more volatile market, seems likely to do something even more dramatic.

Questions:

Assume market prices for crude oil are based on supply and demand of physical crude oil.  Do you think supply and demand for physical crude oil changed sufficiently between the crude low in August of 2007 to the high in July 2008 to the low in December 2008 to justify a rise from $68.70 to $147.20 and then a fall to $35.35?

  • Answer one:  Obviously it did; the market price changed and the market price is always correct.
  • Answer two:  Perhaps politics, High Frequency Trading (HFT), and derivatives also affected the supply and demand of paper contracts for crude such that the price of crude more than doubled and then collapsed by 76% in about 1.3 years.
  • You choose the best answer.

Assume market prices for silver are based on supply and demand.  Do you think supply and demand for physical silver metal changed sufficiently between the silver low in February 2010 to the high in August 2011 to the low in June 2013 to justify a rise from $14.78 to $48.55 and then a fall to $18.53?

  • Answer one:  Obviously it did; the market price changed and the market price is always correct.
  • Answer two:  Perhaps politics, High Frequency Trading, and derivatives also affected the supply and demand of paper contracts for silver such that the price of silver more than tripled and then collapsed by 62% in about 3.4 years.
  • You choose the best answer.

Read More: goldsilverworlds.com

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One Response to Crude Oil & Silver Price – Interesting Parallels

  1. Nanette Z. Bright July 26, 2013 at 3:11 am

    Predictions of the timing of peak oil include the possibilities that it has recently occurred, that it will occur shortly, or that a plateau of oil production will sustain supply for up to 100 years. None of these predictions dispute the peaking of oil production, but disagree only on when it will occur.

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