At the beginning of a bull market silver commonly lags gold prices – that’s nothing new. The lag lasts about a year before silver goes on an epic run to catch its big brother. The breakout in gold above $1400 started the countdown to an explosive move in silver that could begin later this year.
SILVER CONFIRMED A NEW BULL MARKET: One of the simplest ways to determine bull and bear markets is with long-term moving averages. Getting rid of price and leaving just the 10-week and 200-week moving averages we see key turning points in silver. In April 2013 the 10-week EMA crossed below the 200-week MA and confirmed the bear market in silver.
Fast-forward to now – after several failed attempts to break above the 200-week MA in 2016, 2017 and 2018 silver finally succeeded in August 2019 approving a new bull market.
THE NEXT BIG RALLY: At the bottom of the chart, you’ll see the price of gold. After breaking down in 2013, gold entered a prolonged bottoming process. In June 2019, prices exceeded the 2016 high and recently tested the breakdown zone between $1525 – $1550. Silver should match its big brother next year and challenge $26.00 – $28.00.
NEAR-TERM OUTLOOK: Over the next month or two, we expect a cyclical decline in silver back to support near $16.00. That could become the launching point for an explosive rally as silver matches gold to examine the 2013 breakdown zone.
Though silver remains below the $21.23 high set in 2016, its plight is likely temporary. With governments pushing negative interest rates globally, it’s likely just a matter of time before investors wake up and choose hard assets over pathetic paper promises.