Silver Market Update - Upside Slingshot Move In Prospect...

Silver has made modest and hesitant gains compared to gold in the recent past. There are two reasons for this. One is that, unlike gold which is at clear new highs, silver is still working its way through considerable overhanging supply which exists all the way up to its 2011 highs at $50. The other is that there is still very little speculative interest in the Precious Metals as made clear by the silver-to-gold ratio that we will look at lower down the page which means that this new sector bull market is still in its infancy.

On its latest 7-year chart we can see that, having broken out of the Head-and-Shoulders continuation pattern shown last year, which constitutes the Handle of a much larger Cup & Handle base shown on our long-term chart, silver has struggled to make further progress as it has battled its way through more overhanging supply and is only modestly overbought at this time as a result. Gold on the other hand is well in the clear. This lackluster performance by silver relative to gold is normal in the early stages of a major sector bull market and it denotes a lack of speculative interest which is what you want to see as it means that the sector has much greater gains ahead of it. However, the giant Bowl boundary, which is now rising steeply, is coming into play and strictly limiting the downside and looks set to slingshot silver higher soon.

Zooming out, the chart that goes back to the start of the millennium, i.e. to the year 2000, shows the great 2000 bull market that peaked in 2011 in its entirety, and the bear market that followed with a gigantic Cup & Handle base that the price only broke out of last year. On this chart we can see the origins of the resistance that the price is having to battle its way through that was mentioned in the paragraph above, which is the trading on the way up to the highs, especially in late 2011 and 2012. Clearly, a breakout above the 2011 high at $50 will be a “Big Deal” and once that happens we can expect to see dramatic upside acceleration.

As it is so important, the following paragraph about the silver to gold ratio that appears in the parallel Gold Market update is repeated here for convenience…

Alright, so how much speculative froth is there in this market? – after all, you might expect some given how much gold has risen over the past year, right? - but the answer is that there is none, zero, nada – the retail investor is not involved in the PM sector at all yet – they are still trying to make money in the crypto market or in Tech stocks like Nvidia. How do we know there is no speculative interest? - simple - from the silver to gold ratio. Take a look at the following chart for the silver-to-gold ratio, also from the year 2000 and you will see that it is still at levels that we associate with major sector lows!! It is even below the reading it was ahead of the great 2000s PM sector bull market and at the 2008 market crash lows when the sector got taken down with everything else. The only time it got significantly lower than where it is now was during the orchestrated COVID-19 mass psychosis event of the Spring of 2020 when the masses thought that the world was coming to an end. What does this mean? – it means that the upside for the sector from here is massive – this thing has barely gotten started yet.

Lastly, we will look at recent action in silver in more detail on its 1-year chart. While we could see some reaction back near-term from the resistance approaching the October highs, this is overall a very positive chart with moving averages in decidedly bullish alignment and gold markedly outperforming silver in the recent past which is bullish for both metals, so any reaction will be viewed as a buying opportunity for silver and silver stocks. Once it does get above the October highs it should press ahead to challenge the resistance towards the all-time highs at $50 in 2011 and once it clears this final hurdle we are likely to see a dramatic acceleration to the upside and all this could happen very fast if the situation in the Mid-East rapidly deteriorates.

In closing, I want to draw your attention to a recent 18-minute 33-second video by Mike Maloney about silver entitled The Big SILVER Short which includes some interesting very long-term charts and whose importance is elevated even further by the fact that he mentions me.