Silver is gearing for a move up, but is it ready?

6 nov 2022

Silver had a huge move up in 2020, but that was all it managed to do back then. Since its first significant peak in August 2020, it went sideways and started declining. Silver was in a big bear market since 2011, then entered an accumulation range, and then had its capitulation move in March 2020. Then with all the fiscal stimulus, it skyrocketed, but most capital flowed into crypto and stocks, not precious metals. As inflation remains high and interest rates could be near their peak, and investment in metal miners has gone down a lot over the last decade, this precious metal that seems to have lost its shine might be ready to shine again.

It looks like silver had a very healthy pullback into the top band of its accumulation range. Now resistance seems to have turned into support, and the market could head toward 24$ in the next few months. The truth is that I don't believe that the market has fully bottomed yet, although it could very well have, and that eventually, it will have on final leg down towards 16$ and bottom there. The main reason I think that has to do with how the market bottom is that there are two double bottoms around 17-18, and there is a little 'gap' at 16. Essentially I would like to see the market test 16$ because I want to see it thoroughly test that untested breakout, the Yearly S3 Pivot, and the Volume Profile Point of Control.

Another reason that I think the market will go down there again is that I expect a major deflationary episode to take place in 2023, one that has the potential to create a liquidity squeeze (risk asset collapse) that would affect precious metals too. In my opinion, the current move up in Gold, Copper, Silver, etc., mostly has to do with low production/inventories of metals, while demand seems to have bottomed in the short term. Eventually, the market will get crushed again, but I think the bounce has legs for now.

Therefore it would make sense to look for longs in the 16-20$ zone and take profits in the 21.7-24$ area. Shorting 24$ might be a good idea, but I would prefer to watch how the price action develops before I step in.

3 ene 2023

Nota

Silver rose fast and has found some resistance in the zone I had drawn in my chart, but it looks like nothing stops it in the lower timeframes. This is a simple period of consolidation and is ready to pop higher.

Silver indicates something is going on under the hood, and global liquidity has bottomed and is rising. Central banks have their hands tied and are close to their limit. Commodities are scarce, and there is no way to resolve many of these shortages quickly. Silver also tends to do well during deflation as it rallies in response to future stimulus and then quickly absorbs all the excess liquidity.

If it doesn't top around 25-26.2, it will probably go much higher. I am surprised by how vicious this rally has been, as I thought we'd get a more decisive rejection of the downside in this zone. Like I said above, it's better to watch the price action before shorting at resistance, and the truth is that this isn't the price move I'd like to short.