Silver Price Forecast: Breakout Ahead This Fall

There is a big opportunity setting up in the silver market.

It should be no wonder: with global inflation reaching levels not seen in 13 years (source: https://www.cnn.com/2021/06/02/economy/inflation-oecd/index.html), markets are increasingly becoming concerned with ever-rising prices. It seems everywhere we look, prices for the things that we need to live (food, energy, housing) are increasing.

What is one way to protect oneself from rising inflation? By investing in tangible assets, which will at least keep pace with the inflation over the long run, and quite possibly outperform it.

What is one such tangible asset? The age-old form of money: silver.

Silver Rises in Inflationary Cycles

Since bottoming amidst the Coronavirus panic in March 2020 at $11.30 per ounce, silver has enjoyed a significant revaluation upward, closing nearly 150% higher as this article is going to press at over $28.00. However, that revaluation has not occurred in a linear fashion: silver first reached $28.00 back in August 2020. Essentially, then silver has been moving sideways amidst a consolidation for the last 10 months.

Consolidations after significant advances tend to represent pauses within markets. Nothing moves in a straight line forever, and such is the case with silver.

Let us examine silver’s August 2020 through present consolidation for clues as to how it may resolve.

Silver Ascending Triangle Consolidation

Below we show the spot silver price from 2020 through today. Note how silver is once again making its third functional test of the 2020 and early-2021 peaks (black arrows). This resistance zone for silver exists in the $28.00 - $30.00 range (black lines).

Note, too, how the most recent bottom for silver has occurred at higher prices (blue arrows): the first bottom occurred on November 29, 2020 at $21.88 per ounce, while the most recent low occurred on March 30, 2021 at $23.77 per ounce. These higher lows now form a trend of rising buying interest in the silver market (blue line).

When we have a flat zone of sellers and a rising zone of buyers in a market, such represents a consolidation known as an ascending triangle. The pattern is plain to see on the chart below:

What is occurring as this article is going to press is the third functional test of the (black) resistance zone between $28.00 - $30.00. Based on a study of ascending triangle consolidations over multiple decades and in many markets, we can say with a highest probability that silver is not quite ready to break higher quite yet. Ascending triangles tend to need more than three attempts to resolve higher. We thus expect silver to form a short-term top within the next two weeks below $30.00, and to begin trending lower again into June and July.

Buyers may want to wait for lower prices then, over the next 1 – 2 months.

How Low for Silver?

We do not believe the pending correction for silver will be significant. As previously discussed, buying interest is emerging at higher and higher intervals over the last year, as investors seek to protect themselves from ever-growing inflation.

We expect this trend to continue, and that by August, silver should witness buyers emerge in the $25.00 region. From the recent close at $28.00 then, we expect silver has approximately $3.00 in near-term risk.

Upside Potential?

What is the potential for upside reward then in silver?

Ascending triangles have a fairly reliable target projection, which may be calculated based on the widest amplitude of the consolidation, then added onto the breakout point. In this case, the amplitude of the triangle was $8.40, which, added onto the February peak of $30.05 reveals a target of $38.45. Upside beyond this target will be a topic for another day – for now, let us stick with reliable projections that can be made with visible evidence.

Timing the Breakout

What is a realistic timeline for silver to break above its resistance zone and then to achieve the $38.45 target?

Ascending triangles tend to resolve between 2/3 to 3/4 of the time from the first peak to the apex of the triangle. As this consolidation began in August 2020 and has an apex in May 2022, we project in a highest probability that silver will break out between October – November of 2021.

From there, it should be a rapid 1 – 2 month acceleration toward the $38.45 target. Inflation statistics should remain high and accelerating this entire time.

Takeaway on the Silver Market

Silver is within a mid-cycle consolidation after the strong advance of 2020 saw prices rise by nearly 150%. This consolidation represents a pause before the next major advance commences. Inflation concerns are just beginning to be discussed amongst mainstream investors here in the US and around the world. When the average citizen begins to realize how inflation is taking a toll on his standard of living, he will take shelter by diversifying out of US dollars and into tangible assets.

Throughout history, silver represents an ideal store of value during inflationary cycles. At www.iGoldAdvisor.com, we are positioning private clients and research subscribers for the advance ahead in silver by positioning them into multiple forms of bullion and silver mining companies. Investors should not wait until silver breaks out to finalize their positions, but should be using any weakness this summer to prepare for the coming advance.   

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