I’m loading up on Silver for a catch-up move to Gold.
And I already know what you’re thinking. Investors have been betting on this idea since last year… and it hasn’t worked one bit.
This isn’t some sort of original investment thought I’m having. These two move together. Everyone knows that.
But I will tell you what all those investors who showed up too soon were missing…
Animal spirits.
They just weren’t there. But that’s changing.
In other words, silver is a lot more about speculation, and a lot less of a safe haven. It’s the risk-on version of gold.
It has been stuck in a sideways range for the trailing 12-months while gold has been ripping higher in a near-vertical line. Here’s a performance chart:
What is constructive about this is that it’s been consolidating at the upper bounds of a multi-year base, and defending those prior-cycle highs from 2020-2021.
It’s only a matter of time before this range resolves, and when it does, it should resolve higher, in the direction of the underlying trend.
I’m expecting this to happen as soon as we see risk appetite enter the precious metals space in a sustained fashion.
Let’s talk about some ways we can measure this and what the charts are currently telling us.
Here’s an overlay of silver along with a ratio of silver stocks relative to the S&P 500:
When silver is working and precious metals are firing on all cylinders, silver stocks are usually showing leadership. This chart shows the way the relative trend in silver stocks moves closely with the metal over time.
Notice how there has been a massive divergence over the past few years, with the ratio moving sideways while silver moves higher. I think that’s about to get cleaned up as silver stocks rally and assume new leadership.
Gold miners are also on the cusp of completing a massive base on relative terms. That would be another big risk-on box we might be checking soon.
Another thing I expect to see when the animal spirits are alive and well in this space is the junior gold miners outperforming the majors.
If you look at something like GDXJ vs GDX, you will see another big base shaping up and ready to explode higher. I think we will check that box soon as well.
Okay, and how about Platinum and Palladium? I would expect them to start trending higher - at least on an absolute basis, in an environment where silver is ripping.
That looks to be happening now as they both posted huge gains today.
Platinum just had its best day in several years and is basically making fresh 52-week highs. Meanwhile, Palladium is working on completing a tactical base, and PALL just closed at its highest level of the year.
It’s been a long time since we could say anything positive about either of these metals. New uptrends from these guys would go a long way in supporting a bull market thesis in silver, and it looks like that’s where we’re headed.
Last but not least, if I end up being right about silver here, we’re going to see the silver/gold ratio fail this breakdown and scoop higher.
I just love the way this pattern is set up right now. It’s been coiling at fresh multi-year lows for the past month and a half, but hasn’t shown any real downside follow-through. I’m looking for a hook back into the old range.
If and when it happens, silver should be shining again and stealing the show in the precious metals space. And to be clear, gold will be moving higher too, just at a slower pace.
I am going to keep monitoring these intermarket ratios for improving risk appetite and will follow up soon. But I can already see the puzzle pieces coming together. I think this train is getting ready to leave the station.
Today, we got on board with two new long call positions. You can join our Breakout Multiplier team risk-freeand get the trades right now.
We’ve sold10 doubles since last week, so we’re looking for new opportunities to redeploy that capital into. We’ll have some spicy trades out in the coming days.
