Gold & Silver Prices Will Surge On Fundamentals Not Technical Analysis

Don’t be confused.  Gold and silver prices will skyrocket in the future based on the fundamentals, not technical analysis.  Not only will fundamentals be the important factor in the future, they have also been the leading indicators over the past 50 years.

I realize I will get a great deal of flak for stating this, but the facts presented below paint a pretty clear picture.  Now, while it’s true that the many of the gold and silver analysts (including this independent analyst) under estimated the level at which the Fed and Central Banks could prop up the Greatest Ponzi Scheme in history… it’s better to have ones precious metal insurance a bit early than late.

I wrote this article in response to one of the guests on Al Korelin’s radio show.  It was Avi Gilburt of  Avi told Al Korelin that the bottom of the precious market was around the corner.  He said the four-year correction was nearly over and the next precious metal bull market was close at hand.

That sounded real nice until you read his recent article, Stop The Insanity As Misinformation About Gold Continues To Reign.  Here is how Avi views most of the gold and silver (bug) analysts:

Why is it that most who are followed in the metals market and viewed by many as “experts” are so horribly wrong week after week, yet continue to present the same analysis week after week? Are the majority of the participants in this complex really that foolish to continually follow such clearly erroneous perspectives with the “hope” that it will eventually be right?

Avi’s comment here actually sounds logical to many precious metals investors who bought metal at higher prices hoping a recovery was soon at hand.  Unfortunately, as gold and silver prices continued to decline, investor frustrations increased.  While gold and silver analysts can be guilty of being wrong on the timing, they won’t be wrong on the FINANCIAL EVENT OF A LIFETIME.

I want to take certain parts of Avi’s article and show evidence why the fundamentals are the driving force in the value of gold and silver, not technical analysis.

FUNDAMENTAL #1 The Key Driver For The Precious Metals Prices

In his article, Avi made this remark about the precious metal bull market:

I want to start by saying that, yes, this 4+ year correction will conclude soon. So, this market will begin another bull market in the not too distant future. You see, markets, over the very long-term, will continue to rise, as society continues to progress throughout history.

Avi believes the precious metal bull market will begin shortly and will continue to rise as society continues to progress throughout history.  I don’t know if we will experience a long-term bull market, but rather a rapid rise in the value of gold and silver seems more likely.  Furthermore, the notion that society and markets will continue to rise in the future indefinitely doesn’t seem likely either.  I will discuss this at the latter part of the article.

I put this chart together (below) to show why the price of gold behaved a certain way since 1940.  You will notice two lines in the chart.  One shows the price movement of gold and the other of oil.  If you look at the price of gold and oil from 1940 to 1970, they are basically flat-lined…. dead.  Nothing going on there:


However, two amazing things took place in the beginning of the 1970 decade.  Everyone knows Nixon dropped the Gold-Dollar peg (1971), but what was the other?  U.S. domestic oil production peaked in 1970 and begin its inevitable decline.  This caused serious consequences that were felt a few years later during the Arab Oil Embargo:


During Arab Oil Embargo, the price of oil shot up from $3.29 in 1973 to $11.58 in 1974.  Then during the Ayatollah Khomeini-led revolution, Iranian oil production declined 72% from 1978 to 1980.  This had a profound impact on the price of oil as it skyrocketed from $14 in 1978 to over $36 in 1980.  Please look at the next two charts and see how this impacted the price of gold and silver:



While analysts continue to regurgitate that the rapid rise in the price of silver during the 1970’s was due to Hunt Brother buying, who in the living hell was buying gold and oil to drive up their prices??  Never get a good response for that question.

Regardless, the price of oil increased 16 times its 1971 level, silver shot up 16 times and gold jumped 15 times.  Interesting that the precious metals moved up about the same percentage as oil.  Wonder how technical analysis could forecast the peak of U.S. oil production, the Arab Oil Embargo and the Iranian Revolution.

The same thing happened to the price of gold and silver from 2000 to 2012.  As the price of oil shot up from $24 in 2001 to $111 in 2011, the price of gold and silver surged to a record high of $49 and $1,900 respectively.

Let me show you the same Gold vs Oil chart from above:


After the huge rise in the gold and oil price in the 1970’s, they both declined and traded in a range-bound fashion for the next two decades.  It wasn’t until the rapid rise in the price of oil from 2004 until 2011, did the price of gold hit new highs.

Again, the huge increase in both the price of silver and gold were not due to technical analysis or another overdue “Bull Market”, but rather from the fundamental change in the energy market.  Investors need to realize ENERGY DRIVES the markets, not FINANCE.

FUNDAMENTAL #2:  Peak Oil Will Destroy The Market & Most Financial Assets

The one fundamental that Technical Analysts can’t chart on their graphs is the impact of peak oil on the value of most assets (or supposed assets) going forward.  What we are heading into is much worse than anything Technical Analysis can forecast.

Unfortunately, most people still don’t realize the implications of peak oil.  The valuations of most financial assets are based upon a financial principle called “Net Present Value.”  Basically, it’s like a time machine.  A current stock price is based on future earnings.  Future earnings are based on economic growth.  And economic growth is based on burning energy.. and not only energy, but a growing energy supply.

Jean Laherrere was kind enough to send me his updated Bakken Oil Chart.  But before I show that chart, let me show the North Dakota oil production chart he sent me several months ago:


As we can see, the Bakken is the major portion of North Dakota’s oil production.  The chart of Bakken shale oil production (green) has gone up almost exponentially.  And, what goes up exponentially, comes down exponentially.  According to Jean’s calculations (based on ultimate reserves), is that Bakken oil production will fall below 100,000 barrels per day by 2025. 

Here is his updated chart of North Dakota and Bakken oil production:


Again, the (dark) green is Bakken oil production and the red is number of wells producing.  You will notice something interesting happened at the top of the graph…. production (green) started to decline, while wells producing (red) continue higher.  Thus, overall oil production is now falling while the number of wells grow.  This is not a good sign.

We can see the peak more clearly in Jean’s final chart:


Now, while this is only showing the peak and decline of North Dakota (mostly Bakken) oil production, the other major shale oil fields in the United States will follow suit.  When 2016 rolls around, we are going to see serious fireworks in the U.S. Shale Oil industry.

Last week I spoke with a gentlemen who is the president of his own independent oil company in Texas.  He’s an oil geologist looking for conventional oil projects and knows just about everyone doing the same type of work in Texas, Oklahoma and Louisiana.  He told me that the current situation in the U.S. oil industry is worse than what took place in 1985.

He went on to say there was serious trouble ahead next year for the medium and small oil-gas companies.  Furthermore, he said that he couldn’t start working on new conventional oil projects unless the price of oil reached $60-$65.  It’s now trading at $39, and looks to go much lower.

In addition, the only reason the world was able to afford high oil prices was due to the massive increase in debt.  I recently came to the realization, from the work of Gail Tverberg at Our Finite World , that the higher the price of oil goes, the higher the amount of debt that is needed.  Which means, low or zero interest rates had to follow as this massive amount of debt is not serviceable at mid-high interest rates.

I will write more about DEBT-OIL-GDP in future articles.  But, please understand that the massive amount of debt is not sustainable and a collapse is certain.  Moreover, once this debt implodes or is written off, then U.S. and global oil production will collapse as the market can’t afford mid-high oil prices without adding even more debt.

This is the reason the value of most financial assets will implode.  Unfortunately, I do not have a crystal ball as to know when it will occur, but we are witnessing current market volatility and geopolitical insanity due to peak oil… whether we realize it or not.

FUNDAMENTAL #3:  Peak Oil Makes Technical Analysis Completely Worthless

Avi Gilburt stating this toward the end of his article:

Folks, belief in fundamentals, physical demand, production, war, etc. have not and will not provide you insight into the turning point for gold. Gold will not bottom until the sentiment for it has gotten so bad that it will have only one way left to go. That is simply how markets work. Period. End of story. No exogenous event or fundamentals will change that, and if you have not learned that the hard way over the last 4 years, then there is truly no hope for you, or anyone you chose to follow. Yes, I know some of you will view me as harsh, but someone has to sound the wake-up call for the zombies that populate this market.

Avi says that no “exogenous event or fundamentals” will change the gold market.  Well, I just showed during two-time periods when exogenous events (1971-1980 & 2001-2011) did impact the prices of gold and silver.   Anyone with a heartbeat and decent eyesight can tell from the Gold vs Oil Chart 1940-2015, that the price of oil had a direct impact on the price of gold.

As I have stated several times, the coming surge in the value of gold and silver will occur during the collapse of the Greatest Financial Ponzi Scheme in history.  This collapse will occur as we experience a precipitous decline of U.S. and global oil production.  So, the price of oil will no longer be a factor in determining the price of gold and silver going forward… it will be the fall and collapse of U.S. and global oil production.

People need to realize that the Fed and Central Banks can’t raise interest rates because we don’t have a CHEAP GROWING ENERGY SUPPLY.  Where do you all think the “Interest” comes from??  Do you really think interest on a loan or bank account comes out of THIN AIR??  It comes from a growing energy supply.

IMPORTANT:  The Fed and Central Banks had to increase debt to continue growth.  To get growth, you need a growing energy supply.  To get a growing energy supply, we needed higher oil prices.  To get higher oil prices, the Fed and Central Banks had to add a larger amount of debt.  By adding more debt on top of more debt, INTEREST RATES had to fall because the service on the debt was unsustainable.

Can you imagine if the Federal Reserve and U.S. Treasury normalized interest rates?  The annual U.S. interest payments on the debt would be over $1 trillion.. or more.  How will this interest be serviced as U.S. oil production heads into the crapper??

You see, this sort of fundamental approach to forecasting in a peak oil environment can’t be charted using Technical Analysis.  While I don’t know the date when the value of gold and silver will reset to substantially higher prices, it’s a matter of years, not a decade.  Once U.S. oil production starts to fall precipitously over the next several years, this will put severe stress on the highly leveraged U.S. Financial Industry.

Lastly, the notion that we are going to see society continue to progress in the future is a lousy one indeed.  I would imagine any ancient Roman wise enough to make this same prediction back before the Empire collapsed as the great city fell from a population of one million down to 12,000, would have sounded like a real KOOK.

I truly believe the world will be a much different place by 2025.  This will not be due to technical analysis, but the fundamental peak and decline of U.S. and global oil production.  Investors waiting for bottoms and corrections in paper assets via technical analysis will wish they spent more time focused on owning physical precious metals.

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62 Comments on "Gold & Silver Prices Will Surge On Fundamentals Not Technical Analysis"

  1. However, at some point (when the debt-mountain collapses) PM-prices have to decouple from oil-price, because in a peak-oil world people will not afford expensive oil. Right?

    • Markus,

      Yes. I have stated this several times. While the price of oil impacted the value of gold and silver up until recently, it will be less of a factor going forward? Why? Peak Oil and the Falling EROI – Energy Returned On Invested.

      Again, we must remember that the majority of the $100’s of trillions in Conventional Assets in the world are basically ENERGY IOU’s to be paid back in the future. Gold and silver are STORES OF ECONOMIC ENERGY. Big difference.

      I would imagine just a fraction of the Institutions or wealthy moving into gold and silver to protect their wealth will do wonders for the price going forward.


  2. What about bitcoin, could it be an alternative to PM:s

    • A crypo-currency like, BitCoin, act like a precision metals in that there’s a limited supply. However, there’s no limit to the number of crypto-currencies. In ten years, there could be dozens or even hundreds of competing crypto-currencies available. The precious metals club, however, is never going to be open to new members.

    • Markus,

      To some degree Bitcoin may act as an alternative. However, we are going to have problems with the GRID & TRANSPORTATION in the future. I would not want to base my wealth on an electronic account when peak oil arrives. Better to make sure we have physical assets for the most part.


      • Marcoantonio | December 7, 2015 at 4:54 pm |

        I’d be extremely cautious about putting any serious amount of money into an entirely electronic currency such as Bitcoin. The latter has already been targeted by numerous US Federal agencies as an abettor of terrorism, because it can move across borders without any easy trace in real time. Supposedly, ISIS, or whatever its current nom de guerre is, used bitcoin extensively of late.
        Of course, the real problem is that these currencies currently typically avoid taxation, and we are now moving into a period wherein taxation issues will be paramount, because the entire developed world–never mind the rest–is essentially either bankrupt, or dependent on an economy based upon one product, such as (cough), energy products.
        This is, of course, a recipe for disaster, and it is what is motivating the Middle East crisis currently. Qatar, which is US-aligned, wanted a gas pipeline through Syria and Turkey, into Europe.. Syria, which has long been controlled by the Russians, demurred. Russia already has a gas pipeline via Ukraine (ring a bell?) into Europe, and still enjoys the monopoly, which it is not willing to give up. Russia has demonstrated this in the past by actually blocking off access to gas temporarily in Europe during the winter. What the US has been doing in the past couple of years has been deliberately isolating Russia from its required dependencies, first in Ukraine via a coup, then in Syria.
        No good will come of cornering a nuclear-armed rat that long ago stopped worrying about our first strike potential, and developed its own first strike plan, as has been liberally documented. Although Russia is a much smaller country now than before, I do dare to wonder just how long their own forbearance will persist. And do not mistake the fact that they have shown a great deal of forbearance to date.

  3. The price of everything moves on sentiment. Avi’s analysis is significantly more useful to me in the practical application of buying low and selling high. While I don’t disagree with the fundamental monetary issues before us, I am not convinced that they absolutely must play out in only one way. The fundamentals have not really changed in the last 4 years, but boy I’d be very unhappy if I was buying physical at $32 instead of $14. Wait for it …. wait for it ….. fundamentalists are about to be proven right …. finally.

    • Will,

      While I agree with you on the timing of the precious metal reset, we have a great deal more to worry about than the value of gold and silver going forward. This reminds me of the book the BIG SHORT. Several investors, such as Kyle Bass got in the SUBPRIME MORTGAGE TRADE very early. I hear Kyle Bass took slack from some investors who thought he was wrong in spades.

      Well, it took a bit longer than they realized, but I don’t imagine Kyle cried all the way to the bank… do you?

      Again, there will be more serious consequences of PEAK OIL than anything Technical Analysis can forecast.


      • I think technical analysis is nothing more than looking under the hood of sentiment. I think properly applied EW can give us clues as to corresponding price movements on almost any time scale (longer the better). I just think its a mistake to assume that correlations of the past must always remain. If peak oil occurs, the outcome may vary from what today’s thoughts might indicate and technical analysis would give us those clues before they occur.

        • Will,

          We are free to believe what we want. That being said, Technical Analysis works in a market that isn’t manipulated. So, it’s tough to use Elliot Wave Theory when the Central Banks control the interest rates and etc.

          Again, Peak Oil will destroy the valuations of most financial assets going forward. This is also true for technical analysis.


      • The silver chart is the weirdest chart out there at the moment. If you look at this log scale chart
        It is screaming long. A bullish descending wedge and the MacD is crossing. Which is one thing. But for this wedge not to fail silver must decouple form oil.
        If it breaks the wedge I will be looking to buy long futures contracts but there is that nagging fundamental disconnect with oil to take into account.
        That is why this chart is so weird.

    • I think Avi’s or any other technical analyst is worthless when it comes to gold. I agree, that people like Sinclair, Sprott etc were “wrong” over the pat few years and the price dropped, so it seems to be a bad investment to have purchased PM at higher prices. The probles I see however is, that I dont think the PM will go up slowly and there will be time to purchase PM. The reset will be most probably very violent and quick, thus any short term movements and technical stuff will be irrelevant. Either you will have PM in your hands or not. Also, looking at the huge amounts of sold paper gold during quiet trading hours is a strong indication, that the price is hugely manipulated and its irrelevant who is doing it. So how can a technical analyst make a prediction on a market, which is that much manipulated?

      • All technical analysis (EW or otherwise) is simply based on charts. So, when asked how will technical analysts make a prediction in a manipulated market? … well, quite simply, by analyzing the charts. I too believe that the reset will be violent … and when that day comes, you will have to already own PMs. I will tell you in advance that that will be the wave (3) of iii of 3. My goal is to buy (or add on wave 2’s! So, here we are.

        I think there is a belief that technical analysis can only be used for short term wiggles. In fact, technical analysis of shorter term periods simply help refine the larger scale targets and the potential for subsequent moves. It helps in determining if a larger scale wave 2 (like we are currently finishing) is actually done yet. Everything depends on your investment strategy. Most following only fundamentals must be prepared for a long term investment since the charts don’t always align with the fundamentals.

        It is certainly fine to hold your views on the macroeconomic impact that our financial system is in and it does serve to support what I think will happen on the charts, but you just simply can’t make timely buy and sell decisions based on that macroeconomic picture.

      • Worthless? I have been short PMs for four years based on the charts. I am now thinking of going long based on the charts.

  4. There is no Peak Oil… the Planet is constantly replenishing it. E.g. I had worked for ARAMCO, and the new oil fields in Saudi Arabia that were only intended to produce for 25-years in the early 1980’s, are still producing output today. So, in actuality there will never be peak oil, and even if an “alleged” peak was imminent, we are always finding new fields of oil and gas to meet the World demand.

    • Gary,

      While I appreciate your comment, you need to start doing your own thinking. The falling EROI- Energy Returned on Invested proves that peak oil is here. In the 1930’s, the U.S. oil industry burned 1 barrel worth of energy to produce 100 barrels for the market. In 1970, it fell to 30 barrels and shale oil only produces 5 barrels for each 1 barrel worth of energy used in the process.

      While 5/1 EROI still sounds good, the U.S. modern society needs something north of 12/1 EROI to be sustainable.

      Lastly, while Saudi Aramco has continued to work its old oil fields, it’s doing so by pumping in millions of barrels of sea water to flood the oil to the top of the field. The Saudis have large GOSP plants, Gas-Oil Separating Plants to remove the millions of barrels of water each day.

      The water cut percentage continues to rise as the oil percentage falls. This is not a LONG TERM SUSTAINABLE METHOD.


      • silverfreaky | December 7, 2015 at 9:18 am |

        But when we look to the decling of the fracking Chart it seems that it took years until the oil supply is shrinking?

    • You are correct Gary. I even have my own unicorn that farts natural gas.

    • Gary,
      I’m an engineer, to I’m quite familiar with concepts such as exponential functions, replenishment rates etc. Let’s for the moment assume you are correct in your belief that il production occurs via an abiotic process. Unless the rate of replenishment EQUALS or EXCEEDS the rate of removal, then by definition peak oil is a reality. That’s why exponential increases are ALWAYS followed by exponential drops as Steve has pointed out! So the conclusion is that since the extraction rate of any well always exceeds its production rate of same well (assuming your abiotic assumption is correct) that peak oil is a reality…PERIOD!

      • Harryflashmanhigson | December 8, 2015 at 12:17 pm |

        Fabulous comment, Bob! It’s always good to get someone with the required technical and mathematical knowledge to scupper the cornucopian wishful-thinking loonheads!

        The earth does not have a creamy nougat core of pure unadulterated crude oil, though there is a small possibility that some crude is produced by abiotic processes, just simply not enough to run and feed our world the way it is set up now. Gary, it’s time for you to get a new dream, this particular one is rapidly turning into an unmitigated nightmare!

  5. Steve,
    Another great article. Can you please elaborate on the comment that you foresee a rapid rise in g&s prices as more likely than a long term bull market? Is this similar to the Jim Sinclair view of we might be going into a bull market you don’t sell because prices/value of gold & silver rise & stay high? I realize being early is better than too late, but some of us are severely underwater & wish we would have had the foresight to either come in much earlier or waited for lower prices to get more ounces for our fiat.

  6. Here’s a scary thought. What if the price of precious metals doesn’t decouple from oil in the future? If oil and gold/silver have risen and fallen in tandem in the past, peak oil is not reason enough to think that will end. We see a significant rise in precious metals coming based on excessive debt and the rampant printing of worthless paper, among other factors. We also can see a significant rise in oil prices once peak oil is fully in the rear-view mirror. It seems to me that oil might just be in for the same kind of rocket ride to the sky that previous metals are expecting.

    If we see Gold at $10,000 and Silver at $600 could be also see Oil at $1,100? Kind of apocalyptic in our current oil based world.

    • Great Point Linda,

      According to The price of oil in gold for the period of 1946 through April 2014 averaged 14.83 barrels of oil for each ounce of gold. Low was 8.888 in 2005 and the high was 29.388 in 1988.

      Based on the average and given $10,000 per ounce of gold, the price of a barrel of oil would be US$674.31.

      This clearly demonstrates that the problem is not the gold or the oil but the US Dollar and the effects of hyperinflation.

      If you are a retiree on a fixed income you are in a world of hurt.

      Truly is and will be apocalyptic.


  7. PMs are inversely correlated to the dolar and currency prices are set by central banks. When the dolar finishes its current bull market the prices of PMs will go up. But if the next bull market in PMs is going to be initiated first the biggest players have to stack PMs. They can’t miss out on such an opportunity. The question is where is silver going? Are there any estimates as to where hundreds of tonnes of silver are stored?

  8. Wiley Prepper | December 7, 2015 at 12:21 pm |

    Personally, I think the fiat currency will crash and a new gold backed system will emerge. But even if the petro dollar survives… or some other reserve currency survives… or they go with a digital currency – They will still have to inflate the debt… thereby greatly reducing the value of the currency. As Steve indicated, Due to the debt, financial bubbles are going to pop. Some kind of reset must occur in the near future… probably determined by a WW3 fought over trade, currencies, and oil.

    If the precious metals sky-rocket… then great… but if they simple just regain and retain their value… then stackers still win. Someone would have a hard time pulling off a bail-in on my stash. That is something that I can control.

  9. Steve – We here a lot about the shale oil companies losing lots of money at the current price of oil and that they are cutting back production. Some going out of business completely. I see Kinder Morgan got hit today. However, other than Glencore, I haven’t seen the same in the metals mining industry at these low prices. Copper, zinc and lead are all at or near cycle lows. Shouldn’t we be hearing more about production cuts? How about the primary silver miners? How much longer can they exist with current production levels at $14-$15 an ounce? Thx!!

    • Mark,

      Yes, we should hear more about the base metal miners. Look what was just released today. Anglo-American is laying off two-thirds of its labor force, 78,000. That’s a big deal. Watch for more of this in the next several quarters.

      I have not done the Q2 or Q3 Primary silver miners break-even. I will be putting that out shortly. Even though the miners are losing money, its not that bad yet…. compared to the highly leveraged base metal miners who hold a lot of debt.


  10. OutLookingIn | December 7, 2015 at 2:16 pm |


    All I hear is “precious metals rising” or “gold and silver will be much higher” WRONG!

    The currencies will be devalued. What does that mean? To devalue something, is to make it cheaper. So how do you devalue a currency? By printing many more units of it, adding to the already copious supply and therefore making worth less per unit.

    Assets will suffer deflation. NOT ALL. Just those assets that have their value based upon the underlying fiat currencies. The truly valuable tangible assets will maintain their value, it will take that many more fiat units to purchase. Thats if you can find them for sale and for the seller to accept fiat currency notes.

    Silver is silver and gold is gold. No more. no less. Their valuations will rise in what ever fiat is used as the measurement, because the fiat measurement will be devalued, therefore taking many more fiat units to purchase them. The same for a tangible asset such as oil. In the future only the very wealthy and powerful, will be able to afford it.

    • OLI…hate to tell you, but BOTH you and Steve are 100% correct! EROI MUST be taken into account when dealing with oil prices hence Steve’s focus on oil and PM prices decoupling. You are also correct (when all is said and done with), the only thing I can add is that there is yet another factor:

      Typically the inflation of the money supply INDEED is followed by price inflation…eventually. Note that the FULL definition of “price inflation” is the following:

      Inflation of the money supply * Money Velocity. The only thing in the way of $10/lb beef and $100/lb beef is an anemic velocity of money as the Fed has already hyperinflated the money supply. Money velocity will eventually increase…guaranteed, just like it did in Weimar Germany, typically via increased bank lending and/or loss of confidence and a mad rush to physical assets – food, property, PMs, etc.

      • Bob M,

        ” Steve’s focus on oil and PM prices decoupling.”


        There will be no “decoupling” EVER!!!!!!! Oil, gas, Gold and Silver are fundamental commodities that Societies need to function. When they are not readily available, either because the paper market is allowed to go to “never, never land” or the cash market is below cost, the societies that need them are in DEFLATION and NOT functioning.. Societies cannot function without them. Commerce is forced to a standstill. The world is F**ked.

        Understand this or perish.


    • OutLookingIn.

      I am glad that at least someone on this site gets it.



  11. Peak Oil is a financial matter as it is a ruse by the PTB. Oil is abiotic and it has been an orchestrated scheme to shut down production in the political realm.

    Peak Oil is not a fundamental unless one sees it through the glasses of political manipulation.

    • You are not well versed on abiotic oil, like the “rapid-replenish” version which has been dis-proven by statistics on oil production. As to whether any is produced by abiotic means is the essence or realm of theory.

      Abiotic zealots rarely have a geology degree. I do. This abiotic thought came up [like a conspiracy theory] after I got my degree. I assure you not many degree holding geologists put much faith in it.

      But regardless, as Steve states above:

      “The falling EROI- Energy Returned on Invested proves that peak oil is here. In the 1930’s, the U.S. oil industry burned 1 barrel worth of energy to produce 100 barrels for the market. In 1970, it fell to 30 barrels and shale oil only produces 5 barrels for each 1 barrel worth of energy used in the process.”

      This is a fact-based statement. There is a place for faith and belief but they don’t supplant facts and science. Actually I guess they do for some. Politicians immediately come to mind.

      The falling EROI- Energy Returned on Invested proves that peak oil is here. In the 1930’s, the U.S. oil industry burned 1 barrel worth of energy to produce 100 barrels for the market. In 1970, it fell to 30 barrels and shale oil only produces 5 barrels for each 1 barrel worth of energy used in the process.

      • Jacques Rueff | December 7, 2015 at 8:28 pm |

        David you said in the FG post: “I’ll bet silver that the cost of silver on the COMEX NEVER drops a dollar from where it is now. I’ll also bet my geology degree on it, and I do know a few things about real-world supply.”

        It was $16 then – $14.25 today, David – you have ‘lost’ your degree

        so “Abiotic zealots rarely have a geology degree. I do.” may not be accurate.

        • So I join everyone else who has made a prediction on the manipulated commodities futures markets; anyone who has made a prediction has been wrong.

          As I’ve said though abiotic oil thought is irrelevant in that these relatively shallow, on land, not-under-polar-ice-caps oil fields are being depleted. We are reaching peak cost-effective, EROI effective recoverable oil. The abiotic oil zealots that think these oil fields are replenishing as fast as demand are delusional.

          For more entertainment on the abiotic oil thought train read this and a good number of the comments.

          • Jacques Rueff | December 8, 2015 at 5:49 pm |

            ‘…anyone who has made a prediction has been wrong.’

            Untrue, but a sly way of admitting your incorrectness. Perhaps it’s all right of everyone is wrong, too, eh? I, and others, have called this Silver decline for years now – all to the frustration of the analysts-gurus and their followers. Do you think you could be wrong about anything else?

            Perhaps the premise of
            ‘I do know a few things about real-world supply’
            is the fallacy. You may wish to keep an open mind about that. Since when is the price denomination of Silver about supply/demand? Perhaps you were unaware of this… or that it would change with your utterance.

            I am wondering if you would, similarly, wager your Geology degree on this statement as well:

            ‘The falling EROI- Energy Returned on Invested proves that peak oil is here. ‘

            Might I suggest that you not be so caviler with your wagering.


      • Harryflashmanhigson | December 8, 2015 at 12:37 pm |

        As a further Geology graduate, I heartily concur!

        However the theory of abiotic oil origin has been around for a while(this of course depends on when you graduated…..). I think it became fashionable amongst people who were badly frightened by PO roundabout 2005-2009, when the conventional peak hit and prices skyrocketed. The biggest proponents of abiotic oil were Russians starting in the 50’s, but I believe this has been disproven by the presence of biomarkers in crude which conclusively prove them to be biological in origin. Next they’ll be claiming that coal isn’t a fossil fuel as well! I’d love to hear the nonsense origin story for coal beds!!!

      • To the contrary. Fossil fuel has been dis-proven by Abiotic oil and the shear lunacy that oil is a derivative of bird feathers and Dinosaur guts is laughable.

        That said, the point here is that peak oil is being used not as a world reserve but as speak usage. Your ‘statistics/production data are no more than this.

        Therefore your “peak Oil” concept is pure orchestrated politics and not a fundamental in a free market paradigm aka Capitalism. It is a usurped ‘fundamental’ however in Keynesian economics.

        The epistemology of ‘real’ tangible oil is really a side issue when speaking about gold/oil fluctuations when denying the suppression of oil production by politics.

        Once there is conversation between ‘politics’ and Abiotic Oil and present reserve that are being shut down by Agenda 21 ~ people will be able to understand better the argument of why the financial world is going to hell in a hand-basket.

        But we know the manipulation is ‘on’ by the International Bankers aka TPTB and this is the why to the destructive climate change which is not C02 but is by hoarding and manipulation of the planet’s resources by a few.

        Oh yes Abiotic Oil is very real and is not from decaying dinosaur & plant matter.

        Abiotic Oil Very Strong For Next 100 Years!

        United States Sitting On World’s Largest Untapped Oil Reserve!

        Newly Discovered Alaskan Oil Reserve Is Equivalent To 30% Of The World’s Oil Supply 83 Billion Barrels: Alaska Ends Peak Oil Theory!

        Transition from oil to renewable energy 100 years away, says Exxon Mobil

        • Rasica,

          With all due respect, your comment is complete lunacy. Wake up and do some third grade math instead of following lousy conspiracy theories. While conspiracies take place, peak oil is not one of them.

          Gosh… why are people so dense on this SIMPLE ISSUE.


  12. Thomas Keith | December 7, 2015 at 5:34 pm |

    Wow! This article really shows you haven’t a clue about Elliott Wave Theory. A high correlation between the process of oil and gold don’t equate to a cause/effect relationship. And, if they did, why do you choose oil as the cause? It could be that oil was able to go up in price because gold increased in price. More likely, there is a cause and both are effects. Think liquidity here – the increase in the amount of US dollars. Nixon closed the gold window early in the 70’s, and the Federal Reserve has been “printing” money like mad ever since, so everything goes up in price. The more valued by society a commodity is, the more it goes up in price. This alone could explain your charts.

    You seem to indicate we’re at the peak of Bakken oil now, yet you say the price of crude is likely to go lower yet. “It’s [oil] now trading at $39, and looks to go much lower.” How will oil go “much lower” in the face of your peak oil argument. Your fundamental argument is flawed. And, why bring the ancient Roman Empire into the argument? Look at civilization as a whole. The Roman Empire fell, but there was recovery, not for the Romans (bubbles are seldom reinflated), but for civilization as a whole. Where does the developed world stand today as compared to the Roman Empire?

    Elliott Wave Theory has value. If you feel that fundamental analysis has more value, I propose you study up on EWT. You’ll find that it is a most useful tool in timing in certain situations, and you might end up being less of a one-sided market analyst.


    • Thomas, the day you can explain the scientific theory behind EW analysis is the day I’ll believe it’s worth something. And yep, I get it…it’s about cycles….which holds ZERO water when you factor human nature into the mix. Show me the Elliot Wave analysis that predicted the Weimar hyperinflation at the same time that the US stock markets were SOARING!

      • Bob;

        The Weimar Republic collapsed in 1933.

        The Wave Principle was published on August 31, 1938.

        Read and understand your history.


  13. Marcoantonio | December 7, 2015 at 5:38 pm |

    The chart is weird because it is not taking into consideration other geopolitical and cyclic issues, especially, which have rendered these charts essentially useless. For more information, check out Martin Armstrong’s current website. His computer is up and running again, much to the disgust of many.

    And no, I am not a paid shill. Plenty of others use cycles, be they Elliott Waves, or others, to predict upheavals and market direction changes; very few–indeed, no others, to my knowledge–have used a massive history database, compounded with PI-based algorithyms, allied with wave theory, to get where he is. And that is why they fail, often enough, and he very rarely does.

  14. Goldman Sachs is now calling for $25 oil in 2016. The Saudis are determined to maintain market share and squeeze out the high cost shale producers. If $25 oil does become a reality then doesn’t that mean lower silver prices by proxy? Remember as the price of oil goes down so does the largest expense that mining companies have. If they are paying less for oil to power their trucks and drillers then they can afford to mine more silver. They have already shown that they are more than willing to sell into a falling market.

    Don’t get me wrong I do not trust anything that comes out of Goldman but they do hold powerful sway on Wall Street. Since sentiment moves markets what’s to stop them from creating a tidal wave of negative sentiment in the oil patch to drive the price down? It seems to me like we are currently a lot closer to an oil glut than to peak oil.


  15. Steve,

    I am with you buddy but you have shot yourself in the dick on this one.

    Avi Gilbert is not a technical or fundamental data analyst. He is an analyst of “sentiment” – how the market is moving and reacting. No fundamentals there. His 5 year track record is amazing.

    You say; “The one fundamental that Technical Analysts can’t chart on their graphs is the impact of peak oil on the value of most assets (or supposed assets) going forward. What we are heading into is much worse than anything Technical Analysis can forecast.”

    Right!!!!. Ask Avi Gilbert to analyse the oil/gas markets and he would probably agree. Not because they are are truly F**ked but because we are already in Peak Oil and the world is in massive deflation and the market sentiment is in the shitter.

    You also said;” To get growth, you need a growing energy supply. To get a growing energy supply, we needed higher oil prices.”

    Wrong. We have a massively growing energy supply (thanks to the Saudis and soon the Iranians) and the prices are dropping like a rock. The fundamental problem here is that there is no demand. And yes shale oil is totally screwed – always has been as your analysis has shown.

    Further you said; “”So, the price of oil will no longer be a factor in determining the price of gold and silver going forward… it will be the fall and collapse of U.S. and global oil production.”

    Wrong Again! The price of oil, gas, gold and silver will deteriorate as deflation takes over – and it is taking over. The price of Silver, Gold, Oil and Gas will continue to drop due to deflation. All the printing of trillions and trillions of dollars (or whatever currency) by all of the central banks can not stop it. What they are doing is totally disrupting production. When gold hits $700-$800/ounce (on paper) or Silver hits $10.00/ounce (on paper) or when oil hits $20.00/bbl (only the Saudis can make money but there will be no demand)- the producers will be forced to stop producing and close up shop. The reason is the world is grinding to a halt!. The Chinese have huge cities where nobody lives. The Three Rivers Gorge Dam used the WORLDS supply of steel and concrete for a decade but when it was done the Chinese kept on building because money was “free”. When the currencies are devalued, the price of oil will again be “out of sight” so so will the price of gold and silver whose mining depends on oil.

    Silver, Gold and Oil are going to become very expensive when the world’s fiat currencies are devalued. In all previous crises, affordable oil was always there to bail out the world – Not this time!

    The real bitch about EROI is that after the massive devaluation, the cost of oil will be astronomical (as will be gold and silver) not because they will be over valued but because everything else will be either worthless or totally dependent on oil – read FOOD!

    This is our warning. Be thankful that the A88holes that caused this have allowed us enough time to prepare. Don’t let it get away.

    Buy for cash and stash! (Food, a clean source of water, guns, ammo, gold and silver)


  16. Jacques Rueff | December 7, 2015 at 9:01 pm |

    You make some excellent points, however, if I may correct:

    ” The price of oil, gas, gold and silver will deteriorate as deflation takes over”

    with “The PAPER price…”. While physical Gold isn’t a commodity (no links to Industry – too soft and expensive to build cities – why CBs hold it – it is a wealth reserve), PAPER Gold is treated as a commodity in the denomination of its pricing. So Oil, Silver etc. are destined for lower prices – the only financial savior for the system is a revaluation of Gold (remember Bretton Woods?) As someone suggested ‘overnight’ (or ‘over weekend’) and it’s easier to do than you might anticipate – it only requires the collapse of its corresponding paper market (like we are seeing now.) Gold doesn’t have to do anything. Going from $20.66 to $35 didn’t drag real commodities (copper, OJ, wheat, Silver, Oil etc.) overnight with it. This Gold revaluation will be one for the record books… and, again, the other metals or commodities won’t be along for the ride – as it will have to be massive (a slow rise to $5000 Gold and $200 Silver will also mean $300bbl Oil and $40 Starbucks coffee.)

    A beautifully elegant counter to deflation…. without printing currency.

  17. Nigel McLaren | December 8, 2015 at 12:07 am |

    I read with interest all of your comments and there is justification in them all. Globally all raw materials surged to meet demand and we are in a zone of falling demand but with the same or higher production. The Fiat dollar I keep hearing about is here to stay for several more years, certainly until another system or currency is established. It is quite evident that markets are manipulated but the one thing that strikes me being, most of you are all looking to make a quick buck on the demise of a system. In reality buying silver, gold, copper whatever and sitting on it is going to see a lift whatever happens in the medium to long term. Yes Gold and silver are historic safe haven’s. However there is literally an over supply of everything including gold and silver. Yes there are more fingers to put it on and more electronic boards but none the less there is an over supply of precious metals that in today’s world have got little worth bar jewels and electronics. The Saudis could easily pull back production. I would suggest that a deal has been done. The one thing that does ring true being that fuel may decrease in value but this is only one component cost of extracting raw material and yes mines have been stock piling because economies of scale dictates that at full production ore is at its lowest production cost and over production can go on for years but it will come to an end. If countries decide that gold and silver only have an industrial use. Then there truly is an over supply and the price of gold could drop through the floor. I think in the world we live in, fibre optic cables and lithium are of more use and water is probably a better long term investment.

  18. Don_in_Odessa | December 8, 2015 at 3:30 am |

    No worries mates! Looks to me like the PTB are about cause the world to undergo a great culling (war?, disease?). There will be plenty of energy left for everyone who survives … If we will even need it by then.

  19. silverfreaky | December 8, 2015 at 9:43 am |

    I ask myself, which Scenario can lift the PM-Price up?Everything failed since 4 years.
    Is here somebody who really believes that the oil Price will increase in 2016?

    • silverfreaky,

      Maybe you are dense, or you don’t read all my material. The value of gold and silver going forward will be based LESS on the price of oil and more on the DECLINE in production.

      GOT IT??


    • Silverfreaky,

      IMHO, there isn’t a snowballs chance in hell that oil prices will recover in 2016. Nor will the prices of PMs increase significantly in 2016. They will all continue to fall. It is an election year so TPTB will do everything they can to keep the charade going. The FED will increase interest rates to make the US Dollar the most attractive fiat currency in the world. This will lead to the cascading collapse of developing countries fiat currencies followed by the collapse of developed countries currencies. During this time commodities producers will be forced to stop producing and, while this would normally force prices up, in this case, no one will be buying anything except survival essentials. This will effectively destroy the systems of every day markets and their delivery systems.

      At some point, when debt defaults are out of control there will be capital flight to liquidity – to cash. This will be the peak of deflation. Who knows what the final straw will be,maybe the Russians will start a bigger war or Iran will but whatever the final cause to end the deflationary cycle. It will be the beginning of a catastrofic hyperinflationary cycle.

      This is the unavoidable consequence of Nixon decoupling of the dollar to gold in 1972. If you follow Harry Dent or Mike Maloney they will tell you that this is just a natural and necessary financial cycle. What the don’y tell you is that this time will be different, very, very different.

      The two major differences are; 1. the unprecedented intervention to prevent this from happening in 2008-9, which, if left alone, would have been uncomfortable but recoverable and, most importantly 2. we are past peak oil. In all of the other economic collapses there was a readily available supply of relatively cheap energy – oil to fuel a recovery. Not so this time.

      As it is, there will be a world wide depression. Famine, political strife, marshal law and all the ugliness that goes with it.

      It is my believe that this was the original plan of the “Elites & the Pilgrim Society”. Starting with John D. Rockefeller and Henry Kissinger’s secret trips to China in early 1971. They convinced Nixon to decouple the dollar from gold (8/15/71) and this secret agreement lead to Nixon’s “Historic” visit to China in 1972. Their ultimate goal is to create a New World Order with a universal currency.

      Our only hope rests on two things; 1. Our constitutional right to keep and bear arms but not because of that right which will be subverted by marshal law but because there is such a huge accumulation of guns and ammunition in the hands of the American public. and 2. The private ownership of gold in the United States was legalized on August 15, 1974 and, hopefully, the American public has fully exercised this right.

      It is going to get very scary in the next two years and will probably last at least 5-10 years before stability and super regional markets are restored.

      Our only protection is to be very well prepared.

      Are you?


      • Thanks for your opinion and possible scenario. It’s plausible.

        ” and, most importantly 2. we are past peak oil. In all of the other economic collapses there was a readily available supply of relatively cheap energy – oil to fuel a recovery. Not so this time.”

        People are going to be very resistant to accepting this but it is true.

        • David,

          Thank you for your comments.

          “People are going to be very resistant to accepting this but it is true.”

          Brings to mind Linda’s comment above.

          “If we see Gold at $10,000 and Silver at $600 could b[w]e also see Oil at $1,100? Kind of apocalyptic in our current oil based world.”

          I think that represents the problem we all have with our perspective. We have all of our lives been viewing the world through our dollar colored glasses. Many PM stackers seem to believe they are in for a windfall profit if the markets would just turn around.

          The sad truth is that if you are buying PMs for any reason other than insurance against the collapse of the dollar you will be very disappointed – saved, but disappointed. Your “windfall” will be worthless paper dollars.

          As Linda suggests, when gold hits $10,000 per ounce and Silver is at $600 per ounce oil will be, most likely around $700 per barrel which means a gallon of gas will be about $35 per gallon. If gas is $35 per gallon what will the cost of a gallon of diesel fuel be and what will a bushel of corn or wheat cost?

          The good news is, that if you have been buying and stacking PMs, you will be able to buy that gas and anything else you may need. If you didn’t buy PMs you will be shit out of luck and standing in a soup line.

          People want and even need to believe that things will continue to move along much as they have in the past. Dent and Maloney want us to believe that this is a natural, normal cycle. If you buy their stuff you can makes tons of money from the coming “winter season”.

          The truth is that this time it is going to be very different. In part because of the tremendous scope and the incredible damage that will be done to world markets and, most importantly, the spiraling down of the EROI.

          With a diminishing EROI the climb back to “normal” markets is going to be very difficult for the developed world and nearly impossible for much of the developing world.

          This is what causes revolutions and world wars.


          • Jacques Rueff | December 8, 2015 at 6:13 pm |


            I understand if Silver was to escalate in price why it would drag other hard commodities with it. It is so extensively used in Industry. All ‘real world’ commodities are, essentially, changed at the neck.

            But why would a revaluation of Gold cause a spike in Oil, Silver etc. ?? It has no links in Industry. it is NOT a commodity. Did it drag other commodities with it as it rose from $20.66 to $35 overnight? No it didn’t – actually, its price is totally arbitrary. It could be $100,000/oz tomorrow and what would happen? Would it effect Apple stocks? the price of Oil? The price of a loaf of bread? I don’t believe it would – and yet it seems the perfect solution to render mountains of debt into manageable ant hills. It would even but dollars in Joe Public’s pocket as they could sell their Gold wedding band, watches, brooch for 50-100X its previous price. Maybe pay some debts, who knows. Without printing currency till HI. But who would be the big beneficiaries?

            We do have the issue of miners – taxed or Nationalized. Certainly trading halted till announced. The remaining ‘Big Boys’ are already in the government’s back pockets, no? The JR and mid will soon be gong as the price continues lower. Gee, that was easy.

            You don’t even need a Bretton Woods 3 Conference to announce an official price revaluation – you only require the paper market in AU to die. 112X – 296X seems reasonable. If you see things through this lens it is easy to accept that the Silver, Iron Ore, Oil, Steel etc. market will decline with falling production and deflation. And only Gold, the UN-consumed, non-commodity, can save the system.

            Of course you Silver buyers do have the Liberty-minded duty to ‘Buy Silver, Crash JP Morgan’. Best of luck with that.


          • Jacques Rueff

            Who or what entity is going to magically revalue gold?

            Clearly, either you do not believe in markets or just totally don’t understand them.

            Gold IS a commodity albeit a unique one. And yes it is used in industry but not that significantly.

            It is the only standardly monetised commodity due to it’s history. It is too rare and valuable to be used for mundane purposes but it’s price is set by the markets. It is classic price theory and, although it is being manipulated presently, the manipulation can not permanently affect the outcome.

            It is, with sister silver, the only real, reliable money the world has known. Governments and crooks will always attempt to subvert real money for their own benefit to the detriment of others but in the end, the truth will out.

            The only solution to the world precarious predicament is an immediate return to a gold and silver based monetary system but our worlds governments are too greedy for that. As a consequence we will all have to suffer devastating deflation followed by catastrofic hyper inflation.

            Hopefully, out of the ashes will come a universal monetary system based on silver and gold and an end to these horrendous boom and bust cycles based on derivatives and credit swaps.

            Is this really to much to hope for?


  20. Hi Steve,

    I’m a subscriber of Avi Gilbert’s Elliott Wave service as well as a loyal follower of your work, therefore I can’t help but want to let you know that Avi actually not only invests in physical metals only, but also strongly advises against ETFs for long-term holding. He’s also mega bullish on the sector in the long run and hold a select group of major mining stocks. So as you can see, while there are bad analysts in both the fundamental and technical realms, the good ones amazingly points to the same conclusion and take the same action, albeit with completely different thesis to back it.

    With that said, I don’t think it’s naive of him to continue bashing on fundamental analysis, for he clearly does not understand it (I know, I’m in his member forum daily). On the same token, it’s my opinion that we at the fundamental analysis community should recognize technical analysis is not voodoo, but rather a science in itself. The good ones can really help investors navigate short-term (2-5 years) price movements – it’s not a fairytale, but proven fact.

    Moreover, I think it’s the bashing among credible experts to each other truly confuses the average investor, for it forces a not so strong-minded person to choose one doctrine over another, yet fail to realize that good information, even if contradicting, can help make solid investment decisions. When I read his weekly update, I skip to the bottom 1/3 for the technical/conclusions, for the beginning 2/3 are usually uneducated bashing on fundamentals (like in his public articles), which to me is rubbish.

    Scott Fitzgerald said “The test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function.” I profoundly agree, with first hand experience reading both Avi’s and your article.

    All and all, I truly love your work, and I look forward to read much more in the future! Thanks!

    • Mike,

      Thanks for the comments. As you know, I wasn’t bashing Avi himself, but debating the subject of Technical Analysis itself. Again, as the U.S. and global oil production decline in earnest, Technical Analysis will become even worthless as a viable tool.


  21. You whole article was based upon Peak Oil and Peak Oil is The Conspiracy Theory.
    I’m sorry you do not see this!

  22. The article and comments were a great read. Thanks to all. As for gold and silver, I just think of them as “1” or the baseline of money. If you measure their value with various currencies they’ll all show an “increase” in the exchange rate of currencies for the metals, excepting the uS dollar. Holding gold or silver in any dev or emerging country you’d have preserved your purchasing capability.
    Tech analysis has its place as does fundamental. Tech analysis to me is wave or cycle theory. Fundamental is well, fundamental of supply and demand.
    The PM markets are manipulated. COMEX sets the “spot.” There are 300 COMEX contracts for every ONE weight of gold a contract represents. So, you have 300 owners of the same ounce of metal. Most contracts are settled for cash. Few take delivery. COMEX can “print” as many contracts as desired.
    If you want $3000 gold, the uSD has to crash. There’s enough currency units in circulation to make that happen, but has been noted, no velocity.
    Sitting behind all these currency unit are the bonds (more debt) that fathered their existence. Slowly buyers are getting rid of them. The Fed can’t buy too much more; China isn’t; Russia won’t; the EU is melting down, and as the most indebted nation on the planet, still on a spending spree, any bond buyer is going to want more for their money.
    I don’t draw and correlation or causation between PM’s and oil.
    When the govt can’t pay the tab on their debt without printing more paper and bonds that aren’t going to get the bid they want, then it’s game over.
    Watch junk bonds; they’re imploding and taking a whole lot of people chasing their return with them. Auto’s in the uS are NINJ loans; they too will explode as Agenda 21, manuf index, baltic dry index, rail car orders and shipments are telling us we’re going into ultra slow motion which means more unemployment and those 84 month loans aren’t going to get paid. Student loans; nuff said on that.
    The bond market right now isn’t very liquid. Sovereign bonds are on their deathbed.
    Then we’ll get a monetary system reset and the uSD won’t be the reserve currency.
    Then you’ll see gold, silver and oil go ballistic. You’ll also see a whole lot of citizens of the uS in a very bad way.
    I would posit the reserve currency will be the SDR’s, issued by the IMF; the CB of all CB’s. That will reset the “value” of a uSD and uS bonds. “Cycles”/Trends/Charts and Fundamentals of the psychopathy of politicians point me to this coming to pass before 2020 (if we don’t blow the world up before-empires don’t go quietly into that good night).
    I’ve got PM’s way earlier/much cheaper than today(easier to store than oil, and not farting unicorns). Don’t give a crap what happens day to day. Just waiting for the final reel of this psycho-thriller. I’m not trying to “get rich.” Just maintaining my purchasing power to feed, clothe, and shelter me and mine when the movie is over.

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