"I too found the silver minus moving average versus time graph that Eoin produced very interesting, particularly the extension back beyond 1979/80 when there was an upward anomaly - that is an accelerating bull market. It is curious that it is asymmetrical, with more frequent and larger upward spikes. I would guess that a similar graph for S&P would have the opposite bias - is that true? I am also curious about Eoin's remark that he did not think we would see a repeat of 79/80 in the near term (time frame?). Is that based on technical analysis, fundamentals or personal bias? Is there anything in the run up to the biggest peak in 79/80 that is different from say where we are now? David has said more than once that he expects the current bull market in precious metals to end in a bubble top. It seems to me that such outlier behaviour such as that is about as easy to predict as rogue waves (in the ocean). Regards"

Eoin Treacy's view Thank you for this interesting email. First out, at Fullermoney we strive to avoid personal bias. This is a constant challenge and is also something we encourage subscribers to pursue in their own analysis. The Fullermoney credo is founded on an interpretation of technical facts coupled with an appreciation of market history and sensitivity to monetary policy and governance.

Silver's rapid advance demonstrates the current dominance of demand over supply. It has not been this overextended relative to the 200-day MA since 1983. There is no evidence that the advance is over. Reactions in the course of the six-month uptrend have been limited to $4.50 so a reaction of greater than that amount would be required to indicate anything other than a pause. However, the overextension relative to the MA is an inconsistency. From a trading perspective a trailing stop would be appropriate at this point. Silver at today's level is not a risk free trade. Rather the opposite because the more overextended it becomes the greater the potential for a reversion.

Earlier secular bull markets in commodities have tended to be relatively long lived. The 1970s bull market lasted 9 years and catered to the demands of approximately 1 billion people. The current bull market has been in evidence for approximately 9 years and is catering to the increased purchasing power of most of the world's population. Commodity bull markets have been known to last for decades. Since the fundamentals supporting this move affect such a high proportion of the global population, it is reasonable to assume that the current secular advance has considerably farther to go; albeit punctuated by business cycle recessions.

Secular bull markets often end in manias. This is not a necessary condition but it happens often enough to make such an outcome more likely than not. The Nikkei-225 in 1989, Nasdaq in 1999/2000 and Gold & Silver in 1979/198 are examples from just the last 35 years. Therefore I would argue that predicting such "anomalies" is considerably easier than predicting rogue waves. All of these bull markets experienced rapid accelerations, were accompanied by manias among investors and marked the end of secular bull markets when they peaked. Silver is currently accelerating higher but I would argue that a mania is not evident.

Each one of the above manias was choked off by higher short-term interest rates. This was spectacularly the case for gold and silver in the 1980s when Paul Volcker hiked interest rates to historic highs. Right now, monetary policy remains accommodative. QE2 is coming to an end and I have argued that the multilateral intervention to weaken the Yen may act as an additional boost to asset markets - QE3. (Also see Comment of the Day on March 15th). There is currently no evidence to suggest that short-term interest rates are about to be hiked aggressively higher.

Over the last decade, the four precious metals have exchanged positions of leadership. At times platinum or palladium have been leaders. Silver assumed that position a few months ago. On successive occasions an upward acceleration by a leading precious metal has offered a reliable lead indication of an imminent medium-term peak in gold.

Gold moved through $1500 today and remains in a consistent medium-term uptrend. A sustained move below $1450 would be required to question current scope for additional upside.