THE SILVER PRICE: Setting Up For A Breakout?

After gold broke above a critical resistance level, held for the past five years, precious metals’ investors are now wondering, “what’s in store for silver?”  While gold surged from $1,340 to $1,440 in just one week last month, silver only went up a mere $0.70.  Thus, the Gold-Silver ratio increased from 89/1 to 94/1, in the same five-day period.

So, the BIG QUESTION many precious metals investors are asking, “Is silver going to follow gold’s move higher?” And, in several price trends in the past, silver does follow gold higher but also outperforms the yellow metal in the later stage.

To understand the dynamics of the silver price, we must realize it is based upon two aspects of the market:

  1. Technical Analysis
  2. Fundamentals

While many in the precious metals community discount or don’t believe in technical analysis (I was guilty of this for years), the majority of traders, investors, hedge funds and institutions most certainly do.  So, if we ignore these technical levels or formations, then we are also blind to how price discovery is being made in the market… yes, even with market intervention.

Now, I am not saying that the current price discovery of silver at $15.25, is based on sound fundamentals if we compare its real value as a store of wealth to all the DEBT, DERIVATIVES, and JUNK ASSETS held in the world, but rather, how it is being priced by the leading DRIVERS in the market… which are traders, investors, hedge funds and institutions.

To better understand how silver is being currently traded, you must know what these leading PRICE DRIVERS are looking at.  Furthermore, many precious metals investors say that they don’t care about the short-term price movement or technical analysis, but when the silver price happens to fall to a low (or is underperforming gold or the market), then there is no shortage of BELLY-ACHING, and COMPLAINING by the very same people who supposedly ignore this information.

So, instead of watching Kitco for daily price actions, hoping and praying for the silver price to finally start moving significantly higher, if we look at the technical analysis, it gives us some important clues.  Again, I still believe the value of gold and silver will be some of the best assets to own when the over-leveraged financial system and economy finally crash, but if we pay attention to the technicals, they do indeed provide some hints, as they did when gold broke out above $1,360 in a big way.

For example, gold’s price BREAKOUT above $1,360 occurred in a technical formation called, an ASCENDING TRIANGLE.  Here is my chart showing how gold’s price shot above that $1,360 level:

According to technical analysis, a breakout above the Ascending Triangle Top Line is very bullish. Thus, traders, investors, hedge funds, and institutions use this information as a motivation to take confident positions in gold. Now, what are the silver price technicals saying??

Well, if we look at the 40-year monthly chart for silver, its price has been trading in a SYMMETRICAL TRIANGLE formation:

The blue dashed lines show this Symmetrical Triangle formation.  Furthermore, you will notice that when silver finally broke above the KEY $14 Resistance Level in 2007-2008, it shot up to $21 rather quickly. That $14 Resistance Level remained since 1983, but recently has acted as a MAJOR SUPPORT LEVEL. Now, if we take a look at a close up of this Symmetrical Triangle formation, you will see how tightly silver is trading in it:

There is no coincidence that silver is trading in-between this symmetrical triangle.  However, a symmetrical triangle formation suggests a breakout will occur, but it doesn’t indicate whether that will be UP or DOWN.  Thus, market drivers are keeping a CLOSE EYE on the silver price to see which way it will break out of this triangle formation.

I will be explaining this in much more detail in an upcoming video.  Yes, I stated in the past that I would have already made a video, but I have been putting together the charts and will likely publish a new Youtube video in 10-14 days.  Please stay tuned.

Major participants in the silver market have been following two important trend lines in silver over the past several years.  The first one is the 50 Month Moving Average (50 MMA), and the second, is the rising bottom trend line:

Again, there is no coincidence that silver has been trading right up against the 50 Month Moving Average since the middle of 2016.  Please take note that the rising bottom trendline is also the bottom part of the Symmetrical Triangle. Silver has not broken this lower trend line since 2004.  Will it?  Well, it could, but I doubt that it would do so for years because silver is now severely undervalued with respect to gold and most other assets.

Moreover, the direction to which silver initially BREAKS OUT of its symmetrical triangle may depend on the price direction of gold.  So, if gold trends upward, even with corrections lower, then traders will likely believe silver will break-out ABOVE the symmetrical triangle formation that it has been stuck below since early 2013. 

Of course, this information only provides short-term price movements that traders, investors, hedge funds, and institutions look at in determining the market price of silver. THIS HAS NOTHING TO DO WITH THE LONG-TERM EXCELLENT FUNDAMENTALS OF OWNING SILVER.  But, to get to that point, we are going to see it show up in the technicals. Again, more of the details in my upcoming video.

Lastly, many believe that the silver price may go lower or underperform gold during the next recession or weakening economy.  At first glance, this makes perfect sense because a lot of physical silver demand comes from the Industrial Sector. However, if we look at another long-term chart, the Gold-Silver ratio fell to its lowest when U.S. unemployment was close to its highs.  When the Gold-Silver Ratio falls, then the silver price is outperforming gold, and the opposite is true when the Gold-Silver Ratio increases:

The upper part of the chart shows the Gold-Silver Ratio while the bottom of the chart is displaying the U.S. unemployment rate, which is currently at 3.7%.  Yes, the U.S. Government is manipulating the unemployment data.  We all know that.  But, if we just go by the data as an indicator, in 1983, when the employment data WASN’T MANIPULATED, the Gold-Silver Ratio fell to 30/1 when the unemployment rate reached 10.5%.

Furthermore, it wasn’t until the U.S. economy and markets collapsed after 2009, did the silver price shoot up to $50.  So, when the U.S. unemployment rate was 9.2% in 2011, near the highs, the Gold-Silver Ratio fell below 30/1.

Here we can see that the silver price outperformed gold in a big way during two major recessions and elevated unemployment rates. Thus, the fear by precious metals investors that silver will do worse during the next recession may not be true and hasn’t been the case during the past two major recessions.

Also, you will notice that the Gold-Silver Ratio is hitting the upper level of 95/1.  While it could go higher, the ratio always reversed lower back to the mid-level 65/1 Ratio, or even lower.

There’s a lot more to share and explain about silver, so please stay tuned to my Youtube Video update. Right now, the Fed is fighting a market correction, and recession with continued Dovish statements since the Dow Jones Index suffered its worst Christmas Eve trading day ever.  However, they haven’t GONE ALL IN YET with lowering interest rates and starting up QE (money printing).  If they finally resort to doing this, we are going to see what happened to gold in June take place in a much BIGGER WAY in the precious metals.  And, I would imagine silver will still outperform gold in the end.

If you are new to the SRSrocco Report, please consider subscribing to my:  SRSrocco Report Youtube Channel.

HOW TO SUPPORT THE SRSROCCO REPORT SITE:

I would also like to thank those foundation supporters, who have chosen to become a member by making donations through PayPal to further the research and publishing work at the SRSrocco Report.

So please consider supporting my work on Patron by clicking the image below:

Or you can go to my new Membership page by clicking the image below:

Check back for new articles and updates at the SRSrocco Report.  You can also follow us on Twitter, Facebook, and Youtube below:

Enter your email address to receive updates each time we publish new content.

I hope that you find SRSroccoReport.com useful. Please, consider contributing to help the site remain public. All donations are processed 100% securely by PayPal. Thank you, Steve

newest oldest most voted
Notify of
Cobah.
Guest
Cobah.

Don’t have to be the legendary chess-master Bobby Fischer to know that silver is the better
bargain.Peak silver was reached on 2015,the financial gold/silver ratio is totally
ludicrous at 95 and renewable solar energy is off charts.Steve,you mentioned, that silver was
also two Dollars below the cost of production and Finally, silver is “totally unloved” by
the financial community.(quote from Steve)

Foot note. Mr James R. Fischer was 100% invested in silver when he passed away on
January 17, 2008.(very sad story)

DisappearingCulture
Guest
DisappearingCulture

Who is Mr James R. Fischer?

Cobah.
Guest
Cobah.

Correction, ROBERT JAMES fISCHER.

Todd Cory
Guest
Todd Cory

“renewable solar energy”

um no… solar pv is not “renewable”. the very fact that it is dependent on hydrocarbon powered mining and manufacturing proves the point.

sorry, no free lunch.

DisappearingCulture
Guest
DisappearingCulture

“There’s a lot more to share and explain about silver, so please stay tuned to my Youtube Video update.”

There sure is. And that 50 month moving average is a strong “line in the sand” to exceed.

DisappearingCulture
Guest
DisappearingCulture

“What is Up With the Silver Market? Who Is the Whale?”
https://www.youtube.com/watch?time_continue=405&v=SkqdNa6mHy0

Gercsak
Guest
Gercsak

Professional traders base their positions on 80% fundamental analysis and only 20% technicals. Only high frequency trading is based purely on technicals. See Anton Kreil’s presentation on youtube.

Silver is most likely lagging because people don’t believe the recent breakout in gold will last, ie we are not in a speculative stage at all yet.

J
Guest
J

These graphs that show prices are interesting but not the most important driver for price. The cost is most important because it represents if the present price will sustain the costs for profit and the survival of the business. Then we have the average yearly concentration that represents if the energy needed to process the precious metal is increasing or decreasing. We also have the total mined quantity of precious metal which may be increasing or decreasing each year as well as the demand of precious metal from each sector per year so we can see if the demand exceeds… Read more »

Rob
Guest
Rob

Here is a true story. I used to trade in shares. Before market opening, I saw the expected opening price of a particular share I was trading in. I then placed a buy or sell order. I watched my order go in and then a second or so later I watched as the algorithms kicked in and automatically placed buy and sell orders all over the place to bring the expected opening price back to the same level. I removed my order and again watched the algorithms do their stuff to return to the same expected opening price. I repeated… Read more »

OutLookingIn
Guest
OutLookingIn

Gold/Silver Ratio
Historic Highs:

January 1931 @ 77.90
March 1936 @ 77.78
September 1941 @ 97.31
October 1986 @ 75.42
January 1991 @ 100.01
February 1995 @ 83.88
June 2003 @ 79.01
October 2008 @ 78.74
March 2016 @ 80.57
These statistics cover 85 years of data, with an average high GSR of 83.40

dale
Guest
dale

Good list. Thanks

petedivine
Guest
petedivine

I was listening to a MacroVoices podcast. The guest was Jeff Snider of Alhambra Financial. He’s an expert on the Euro-Dollar system. He’s saying something odd is occurring in the Federal Reserve IOER markets. Looks like banks don’t trust each other. Could be an early warning something is about to hit the fan.

https://www.youtube.com/watch?v=SZEKVz2KCXQ

Chart book
https://www.macrovoices.com/guest-content/list-guest-publications/2976-all-stars-jeff-snider-chartbook-july-15-2019/file

4 oz
Guest
4 oz

Have never been a big believer in the significance of the Gold to Silver Ratio. I mean sure, it gives peeps something else to look at and maybe talk about…..however, am beginning to think -they- cant let the Gold Silver Ratio get much wider….cuz that’ll start driving too much unwanted attention to Phyzz Silver.

OutLookingIn
Guest
OutLookingIn

The GSR is at/near extreme highs.

Silver almost always lags the price of gold, at the beginning of a precious metals bull market. Then just as always, zooms past gold and outperforms to upside significantly.
The reason for my post above, is to show that these extreme ratios are not all that common and that the ratio ALWAYS reverts to its mean. Which ALWAYS means a much higher silver price. We are quickly approaching just such a reversion.

james r
Guest
james r

Silver has finally made a move. Maybe this is where the ration of gold and silver finally favors silver.

https://www.kitco.com/charts/livesilver.html

OutLookingIn
Guest
OutLookingIn

“Silver has finally made a move.”

The old saying; “Don’t count your chickens.”
As of posting this, the silver price is up to $15.57
That still puts the GSR at over 90

james r
Guest
james r

“ratio”

David
Guest
David

Looking at silver chart right now. A daily close above 15.70 and it looks like it could be off to the races. Probably break it within the next couple days… then off to the races.

DisappearingCulture
Guest
DisappearingCulture

We shall see. I’m skeptical, but with it would break out of the confines.

james r
Guest
james r

So far looking good this morning for silver !

David
Guest
David

We have liftoff.

dale
Guest
dale

Timely article Steve. And dead on I think. Technical Analysis can be useful noting that Tim e is the reliability variable. The shorter the time, the less fundamentals are a factor. The greater the time, the less fundamentals can be overcome. The stag is set, Ag/Au ratio and all.

Look at that triangle on the monthly chart though. It wouldn’t surprise me if silver were held down into winter as they try to squeeze out one more hit. But I wouldn’t delay final positions past the second week of August. Or past tomorrow if you can swing it.

Big Silver
Guest

As of 12:00 noon, July 17, 2019, the most well-timed article of the year!

Silver at 15.95! Way to go Steve!

james r
Guest
james r

Nice work Steve !

Cobah.
Guest
Cobah.

Steve.
Is imperative a prompt release of the video,I also have
very powerful hunch that finally silver will explode higher.

Cobah.
Guest
Cobah.

The timing was perfect, you nailed it…
your video will definitely go viral…

Congrats.
(Silver up 2%)

DisappearingCulture
Guest
DisappearingCulture

A nice breakout today, but a book has more than one chapter. Let’s calmly see what happens. I see a close of about $16.13 twice this year on a historical price chart at the end of January, and again around Feb 20th.

Don’t get too excited; you may be setting yourself up for disappointment.

james r
Guest
james r

Actually I prefer we stay as an elite group of investors. Makes me feel special!

OutLookingIn
Guest
OutLookingIn

Its just after 9:00 AM NY time –

Silver after being jerked higher/lower, now sits at $16.04
Gold is lower along with the US dollar.
As DC says above – “Lets see what happens – calmly”.
The only place for ‘Irrational Exuberance’ is when the price of silver sets a new historical high and maintains that price through a weekly close. Then yell, Yippeee!!

DisappearingCulture
Guest
DisappearingCulture

The difference between a rally and a real breakout is taking out highs from 2018 [for a start], and it has a ways to go to accomplish that.