We’ve been talking about Silver since its initial breakout in late May, but over the last few weeks, that breakout accelerated and took prices to their highest levels since 2012.
In this week’s “Chart Of The Week” we want to provide perspective on the recent move and discuss what’s next for Silver and Precious Metals.
Below, the weekly chart of Silver shows market participants being frustrated for the last six years as prices went absolutely nowhere. And even more so in the last year, where Gold has returned over 50%. Could you imagine the frustration of owning Silver in that environment?
Click on chart to enlarge view.
Now we’re seeing the opposite. In late May, prices broke out of that 6-year range, consolidated for a few weeks, and have been ripping higher for the last three weeks.
Years of frustration and then all this progress in just a few weeks.
Did you catch it?
Times like this are a good reminder that you need to know who you are as a market participant. Are you willing to sit through these long periods of nothing to get the payoff of the underlying fundamental story? Or can applying some Technical Analysis reduce the opportunity cost of those positions and improve returns by helping time entries/exits?
Something to think about.
Anyway, any doubt about the Precious Metals bull market has been extinguished in the last few weeks…and the good news is history tells us there’s likely more to come. “The bigger the base, the higher in space” is how we learned it, and a 6-year base is a great foundation for Silver to work higher from in the coming quarters and years.
In addition to price trends and momentum characteristics remaining supportive of higher prices longer-term, Silver outperformance is actually a big positive as it shows strong risk appetite across the entire space.
Below we have the Silver/Gold ratio pushing above an 8-year downtrend line and its 2019 lows near 1.07. As long as prices are above that level, then this ratio’s bearish to bullish trend reversal is intact and we can expect further outperformance from Silver.
And on an absolute basis…Gold continues to march higher as well, with prices about halfway between our upside target and risk management levels of 44,500 and 56,800, respectively.
In conclusion, it’s clear that any weakness in these Metals needs to be bought as their absolute and relative trends continue to the upside. If you missed the initial move in Silver, don’t fret. There will likely be opportunities in this area for many quarters and years to come.
Another angle we’re looking at this thesis from is in Equities. Despite the strength in Gold, Silver, and superficially Copper, we’ve yet to see the Nifty Metal Index or many its individual components break out. If and when the Nifty Metal Index breaks above 2,175-2,200, we can then look to the Equity market to take advantage of this strength we’re seeing in Precious and Base Metals. But, we’re not there yet.
The uptrend in Precious Metals and the strength of Copper and Base Metals was a big topic of our Member’s-Only Conference Call on Tuesday, along with the other major trends we’re taking advantage of across the Commodity, Fixed-Income, Currency, and Equity markets.
Thanks for reading and please let us know if you have any questions!