We have been calling for much higher silver and we are beginning to see this happen. The past month gold has been reflecting global QE, failed economic policies and geopolitical tensions. After more than 6 years of suppression and pent up energy we are seeing a release into the markets on all sides. The reality of the economic collapse that began in 2007 / 2008 can no longer hide nor be hidden.
While gold is taking the world by storm, silver is following up with larger gains, as it should and as it will continue to do. The demand for silver as investment is beginning to materialize and over the remainder of 2019 we believe it is going to take people by surprise.
Now we are beginning to see the bond market turn over, with several varieties inverting, at least for short periods, and this is a major sign of instability in all markets. The bond market is the single largest market in the world and when it begins to have major problems this resinates throughout all markets. If the Federal Reserve Note, U.S. dollar, begins moving lower, which is what President Trump wants, this will push gold higher and push silver higher.
Where has silver been during the run up in gold? Silver didn’t begin moving up in earnest until mid-July, at which point it began to outperform gold. Currently, silver is trading near 18.18, up over 3.0% on the day and up over 9% in the last 3 days! Silver is heading into trendline resistance and the RSI is in overbought conditions. Silver, like gold, also looks ready for a pullback with first support at the bottom trendline, near 17.75.
As silver began to outpace gold in July, the gold/sliver ratio began to roll over. The ratio put in a high near 93.45 and traded off into the end of July to 85.60. It then bounced 50% of the move from the mid July high to the end of July low. The high on August 5th was 89.84. This set up an almost perfect AB=CD pattern, where the length of A to B should equal the length of C to D.
Although price never moves in a straight line, if that is the case here, it would suggest a target of 81.75 in the gold/silver ratio. This would mean continued out performance of silver over gold in the short-term. Source
As the Federal Reserve begins to reverse everything that has been done since 2010 with QE, we are going to see fireworks in the precious metals. We have been on record for at least a 50 bps lower probably at the next Fed meeting. We have also stated we believe there will be a total of 100 bps before the end of the first quarter 2020. This will send gold much higher and silver, as we are currently seeing, will move higher faster.
We originally thought we would see silver in the $30+ neighborhood in another couple of years. We now see this happening much sooner. The day after silver crosses the $20.25 mark and holds above this line for two trading days we should see silver really begin to catch fire and race higher.
The damage is done, the paper illusions are wearing thin and the big money seems to be smelling blood in the streets. If they don’t smell it, they are certainly anticipating it and putting themselves in position to capitalize on the situation.
As more investors move into silver, silver will continue to move higher. The only question that remains is if the silver market will begin feeding on itself? More investors drive silver higher and higher silver attracts more investors which drives silver higher that attracts more investors…round and round, higher and higher.
The chart below is courtesy of SilverPrice.org
