Silver Market Update: TINY DOWNSIDE, HUGE UPSIDE...

At this point, given what is going on in the world, silver is regarded as probably the best value investment around with very little downside and huge upside. It is still significantly undervalued relative to gold, which reflects the recent negative sentiment towards the Precious Metals sector that is characteristic of a bottom. The recent weakness across the sector has been due to a combination of a relatively strong dollar – it has been strong relative to other currencies but intrinsically weak – and rising interest rates. However, the rise in interest rates has been due to the gathering meltdown in the debt market which the Fed and other Central Banks are trying to stave off by means of creating trillions of extra dollars or other currencies, a course of action that will lead to hyperinflation that will in turn trigger a torrent of funds seeking safe haven to flood into the Precious Metals whose finite supply will result in a sector bullmarket of unprecedented proportions. Now to review the charts

We start with the 20-year chart which is most interesting and useful as it shows the great 2000’s bullmarket that culminated in a terminal blowoff spike into a high in May of 2011. This was followed by a quite severe bearmarket that ended with the giant Double Bottom that formed between 2015 and 2020, and we can ignore the freak Covid Crash drop in the Spring of 2020 which turned out to be a fooler move or “head fake”. After this deceptive false breakdown silver broke out of its Double Bottom and rocketed higher in 2020, a move that is regarded as the 1st upleg of a major new bullmarket. This being so, the reaction from mid-2020 through to the present is thought to be a giant bull Pennant and if this is indeed the case – and it seems like a reasonable presumption given the extraordinary developments that are now unfolding – before too long we should see another powerful upleg that will be confirmed by a break above the resistance at the key $30 level, an event that will be expected to trigger a powerful advance that could be of unprecedented proportions. Before leaving this chart we should note that the overall positive divergence of the Accumulation line makes this scenario all the more likely.

On the 5-year chart we can see recent action in much more detail. Following the Covid Crash false breakdown in the Spring of 2020 silver rocketed higher breaking clear out of the Double Bottom base pattern that we looked at on the 20-year chart but since mid-2020 it has run off sideways / down marking out what is believed to be a giant Bull Flag and the reason it has been doing this is that it has been “marking time” during an unfavorable period for the metals due to an advancing dollar index and rising interest rates but as mentioned above the extraordinary measures being undertaken to maintain liquidity and prevent a systemic lockup, namely vast amounts of new money creation using any excuse, the latest being war, guarantee a rapid trend into hyperinflation that must of necessity inflate the price of all assets with intrinsic value, including and especially the Precious Metals. Right now the price is about in the middle of the bull Flag and so silver and all things silver are viewed as most attractive here and we watch first for an upside breakout from the Flag and then for the price to break above the key resistance shown approaching and at $30. Once it gets above $30, silver is likely to take off like a rocket.

While the 6-month chart is of limited use technically it does enable us to see in detail what has been happening in the recent past. The sudden break lower late last month and early this month is viewed as a “head fake” meaning a false move and as a “bear trap” and on the 5-year chart it certainly looks like no big deal, and this break lower has been followed by a reversal and recovery in recent days.

Whilst we cannot rule out minor short-term weakness occasioned by further dollar gains and rising rates, overall this looks an excellent time for investors to busy themselves accumulating all things silver while they still can – silver ingots, coins, the better silver stocks and you can even enjoy it by becoming “a silver buff” by buying such things as silver pendants and rings, and while this may seem to some a little cranky, they won’t find you so eccentric when their fiat buys them nothing and you can exchange items in your collection for things that you might require in the future, like food.

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