This month has seen several news based gap ups for gold and the silver price chart that have simply been sold that is causing confusion for those that follow the trading action and trade the iShares Silver Trust (NYSEARCA: SLV) ETF . Both metals soared during the confrontation between Trump and the Iran administration only to fade back down. And the same thing essentially happened again this Monday when the DOW Jones Industrial Average fell over 440 points during a day of coronavirus worries. So what is a silver bull to think now?
The chart tells a very simple story. The price of silver is simply consolidating and going sideways to work off the big rally the metal put on last year. It really doesn’t matter what the news events of this month were going to be as this was likely to happen no matter what. The silver price now has support at $17.25, the point of its 150-day moving average, to make for a nice place to buy for those that seek to accumulate now.
The daily stochastics for silver are now oversold. Notice though that the silver/gold ratio is trending down and it trended down from January to July of last year. That means that the price of silver has been under performing the price of gold. You wouldn’t know that from big cap silver mining stocks though and small silver miners that are really positioned, but this is the story for the metal.
I consider this just a temporary deal. Gold began a clear new stage two bull market last year when it cleared $1350 an ounce, which had acted a resistance on it for over five years. At the start of a metals bull market gold typically goes up faster first and then in time silver gallops ahead in terms of monthly percentage gains. That moment is coming. It isn’t now. It isn’t today, but it is coming for the silver bulls.
Recent action when you look at these metals moves in context with other markets shows us that there is not only limited downside, but a clear relationship with interest rates and the bond market is what really drives the price of gold now. The US stock market is set now to chop and not soar for the time being and that helps the metals outlook too. I talked about the bigger picture in an interview with Jim Goddard of www.howestreet.com you can find in this video:
-Mike
