Silver Lining Turning Forth
By Monish Chhabra ǀ April 19, 2021
The price of the metal silver is at a key juncture. If it is to hold on to its chartered territory, right now is the level around which it should find a bottom.
The chart below shows the recent trends in silver, till the end of March 2021. The blue graph shows the 2-year trend, and the orange graph shows the trend that started after the last major low in March 2020.
The green dotted line is the bottom trendline over the last 2-year period, and the red dotted line is the bottom trendline since the last big low point.
Both these lines are converging right now, at the current price. It is a low point on both of those trends simultaneously.
If these trends are to hold, this would be a level for silver to find its bottom, and gradually turn upwards.
Two Brothers Playing Together
No discussion on silver is complete without talking about its big brother – gold.
We look below at the longer-term trends in gold (in orange below) and silver (in blue below), over the last 15 years, till the end of March 2021. The starting level for both is normalized at 10, to capture the effect of their relative movement against each other.
Gold (orange) & Silver (blue)
The dotted lines in red are the low trendlines, while the one in green is a high trendline. Two periods are highlighted in grey; the recent one and the second half of the year 2009.
These two shaded periods look strikingly similar in their price behavior; prior to and during those intervals, and expectedly afterwards.
Key things to note:
1) Prior to both these periods, gold and silver hit major lows. During such episodes of crash, silver usually fell more than gold.
2) During both those periods, the recovery was well underway. The prices were testing the respective trendlines in red. In such recoveries, gold usually started the uptrend earlier.
3) Eventually gold and silver prices hit major highs at or above the green trendline. The later part of the recovery usually sees silver rising much faster than gold.
From where we stand today, there is high statistical probability that both gold and silver may find their way up to the green line, over the next 2-3 years.
If that move happens, keeping the statistical ranges in play, we could see:
o Gold prices rise by +50%.
o Silver prices rise by +100%.
Metals move up and down in long cycles. This cycle’s bottom for both these metals is likely in.
The up-cycle has already started. Key levels are being tested. The short-term trends have converged to a point of acute stretch on the low side.
The stage is set for a good play of risk vs reward. Now is the time to get in the groove, and let the market do its dance.
This write-up is for informational purpose only. It may contain inputs from other sources, but represents only the author’s views and opinions. It is not an offer or solicitation for any service or product. It should not be relied upon, used or construed as recommendation or advice. This report has been prepared in good faith. No representation is made as to the accuracy of the information it contains, nor any commitment to update it.