Silver is looking good at this point. A major rally is expected to take place provided silver continues to trade above 17.40 USD/oz. If this move higher takes place it would qualify as a tactical rally in the context of the new secular bull market that started in June of 2019. That’s a powerful combination, a dream for silver bulls and any momentum investor.
In June of 2019 research identified the start of a new secular bull market on silver’s long term price chart.
Our silver price forecast was very clear in the projection for 2020 as well as the very longer term, and this quote from that forecast says it all:
Based on the long term charts which show silver’s dominant patterns we expect this new bull market to continue for some 8 years. That’s the same time the bear market took to complete.
In 2020 we will see a slow slope of the rising channel. This may accelerate temporarily in 2021. Bull markets accelerate slowly but surely.
That’s the essence of forecasting: projecting trends that are about to happen, and spotting them on the chart as they arise way before they are visible to the public.
2019 was a special year for the silver (and gold) market because of 2 reasons:
On the one hand, as said before, the eight year bear market turned into a bull market in June. On the other hand, and probably more importantly going forward, silver’s subsequent rally was relentless. Now that’s where it becomes interesting because the summer rally did create the starting point of a new rising channel, a characteristic of a bull market.
Below is the daily silver price chart for 20 months. It also shows the next few months, and what the near future could look like with our projected rising channel.
The message of this chart is clear: silver’s bull market is set to continue as evidenced by the light green bull market channel. Moreover, it says that the area between 17.40 and 18.90 USD/oz (red box annotated) is a congestion area. Once silver can clear that area we expect a fast move higher.
When exactly this rally will materialize is hard to forecast. It may start anytime or it may take a few months until the summer. It is a matter of closely monitoring price movements especially in the red area on the chart below.
The flipside of this bullish story is 17.40 USD/oz, the line in the sand. Any sustained break below this price level will invalidate the bull market channel. Our assessment is that the probability of this failed scenario is less than 5%.
(See full size chart here.)
If anything silver is hypersensitive to inflation expectations as well as real inflation. With the recent trend change in monetary policies it is clear that inflationary forces are center stage again. That's the message of the silver chart, and silver has a lot to catch up. It is one of the most undervalued assets. We expect the ongoing reversal to continue for several years, and we believe the mean reversal effect as a result of these monetary and economic conditions to bring the price of silver close to $30 USD. That's when speculative demand will take over control, and push silver to previous highs in the next few years.