The patterns of silver price movements tell an important story.

In this article, I would like to explain to you the mainly “technical” reasons why I am so optimistic about a rebound in silver in the coming years. I have already discussed the fundamentals and the state of the silver market in this article last year, but when the technical aspects of past price movements are added to these, I am reminded again and again of Mark Twain’s quote below.

Source: Cervello

Although history does not repeat itself exactly, we can observe recurring patterns and trends that can help us understand and predict future events. Understanding these patterns allows us to adapt, take advantage of opportunities as they arise, and avoid the pitfalls experienced by those who have gone before us.

Today, I would like to offer you some “patterns” that may indicate what “path” silver is about to follow. But with the caveat that financial markets and economies are so intertwined that changes in one can have important consequences for the other, and vice versa, no one knows what will happen tomorrow, but as the period lengthens, the outlook is becoming clearer.

Nasdaq 100 vs. commodities

A historical look at the value of 100 stocks within the Nasdaq technology index compared to the value of commodities shows a marked undervaluation of commodities. History shows that after such levels, sooner rather than later, there is a reversal, and commodities and “tangible” investments regain their “strength.” An article on this topic can be found here.

Source: BofA

Gold vs. SPX

Silver will gain particular strength when the chart of the relationship between gold and the US SPX stock index, also on the daily view, soon makes a breakthrough. When this happens, it will mark a turning point in the transition of large capital from the stock markets to precious metals.

Both the gold price and the SP500 index have been rising recently and have achieved technical breakthroughs, as can be seen in the charts below (GOLD, SPX). The gold price movement is still relatively early in the upward cycle and has “fresh” energy. While the upward movement of the SPX index has been observed since 2012, the energy in the latter is slowly fading. For this reason, we can expect a breakthrough in their relationship. This will be a historic shift, which will also clearly show the huge increase in capital flows into commodities, particularly precious metals.

Source: Graddhy

Gold vs. Treasuries

This week, the gold/treasury ratio has moved to levels reminiscent of the late 1980s. Investors are only now starting to realize that gold prices can actually rise while Treasury values fall and interest rates rise.

This scenario is playing out between significant trends of de-globalization, long-term inflation, and the activity of central banks, which are eagerly trying to transfer their balance sheets to historically credible neutrals such as gold. If this is positive for gold, it is, of course, also very positive for silver.

Source: Crescat

The price of gold today

The price of gold always paves the way for silver, which usually shows up with some delay. Gold prices have officially surpassed USD 2,300 for the first time in history. Since February 14, gold has risen by a staggering $300 per ounce, or 15%, in less than 2 months. Even after three interest rate cuts were removed from the market’s forecasts, gold is still climbing. Geopolitical tensions and renewed inflation concerns are the main causes. Many investors are already calling for gold prices above USD 3,000 as the climb continues.

Source: KobeissiLetter

The 53-year-old bull trend of gold

A broader look at the gold price also bodes well for silver. We have seen three bull trends in gold over the last 50 years, and we are currently in the third cycle. Given the past, it is reasonable to ask how intense the third cycle we are in will be. Also, due to the fact that the main reversals between investment ratios are yet to come…

Source: Gradhhy

Silver price: 2020-2024

Silver is now at its highest level since May 2021. If the peak at approx. USD 29 per ounce of silver currently represents a “ceiling,”  it will become a “floor” once it breaks through this level. It will thus play a major role in future price movements.

Source: Hajiyev Rashad

Price of silver in 2020–2024

This silver chart offers an even longer horizon, going back a full 8 years more than the chart above. The silver chart looks fantastic. The resistance level at the top, tested in January 2022 and January 2023 at $26, has been broken. After breaking the fabled $29 an ounce, the next target will be at $36 an ounce.

Source: Barchart

Price of silver 2008–2024

A 16-year look back at the silver price clearly shows two important things. Firstly, we see the peak of silver in the previous commodity cycle, i.e., in 2011. And we can clearly see the “cup-shaped” pattern of silver. This pattern can only be completed first by revisiting the 2011 silver peak.

Source: Graddhy

Price of silver 1976–2024

And finally, the most comprehensive look at the silver price goes back to 1976. As you can see, it took silver 31 years to form a very large “cup model” and the last 11 years to form the “handle” of that cup. If this is the case, it would be an extremely bullish price pattern for a “cup with handle.”.

In more detail, we can see that Silver is attempting to make an exit from the “handle” at point (1). If silver successfully makes this move, it will be very “bullish” and, as a result, will reach the top of the cup-with-handle pattern close to $50. Above this level, silver would “explore” levels never seen before in history.

Source: Kimble Charting

Conclusion

The analysis of the above graphs tells an important story of silver’s history while also predicting the future trend of the price of silver as a precious metal. Although short-term anomalies and unexpected events in economies can cause expected fluctuations in silver prices (more so than in the case of gold), the long-term perspective shows the path that an investor should pursue to arrive at the final, desired destination. Given that silver has not seen record highs for 13 years, and gold has been breaking them for the last few months, we can be sure that silver may also soon enjoy a return to “glory.” With these “predictable” events repeating themselves, each of us will realize that we do not have enough silver in our portfolio.