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Could Silver Begin to Outperform Gold in the Long Run?

Published 03/11/2024, 02:54 AM
Updated 07/09/2023, 06:31 AM

Not the first time I have given readers this list of leading indicators to watch for a potential rise in inflation:

  1. Silver-and if it can begin to outperform gold
  2. Oil, if spikes over $80 a barrel
  3. Sugar, if even with increased production begins to move up back over 23 cents a pound
  4. The dollar if fails 103 and selling pressure returns.

Earlier in the week we focused on sugar.

For the weekend, let’s focus on silver.SLV-Daily Chart

The dollar, also on the list, trades under 103 yet into support at 102.50 area. Let’s assume for now, the dollar will have issues getting back and staying over 103.

That is bullish for metals.

As far as silver itself, why it is so important to watch is that with gold rallying, silver is also catching bids.

However, it is when silver outperforms gold that we start seeing 1979 all over again and a rise in inflation-this has not happened yet.

With Friday’s jobs report and on the heels of Powell’s speeches this past week, the consensus is that rates could drop come June-a catalyst for inflation?

Perhaps.

Silver though, is a bit more complex.

There is, like all commodities, a supply and demand component.

The supply side is mainly influenced by mining output and whether it can keep up with demand (used in solar panels, cars, manufacturing).

Then there is scrap silver, a huge component of recycling.

On the demand side though, here is where price pays.

Besides during periods of economic growth, during inflationary times, silver demand can not only remain stable, but it can also grow as an investment demand.

That is precisely why we are watching.Silver Futures-Daily Chart

I include 2 charts.

One is the ETF SLV, and the other is cash futures.

The SLV chart shows silver clearing the January 6-month calendar range. Bullish.

The Real Motion Indicator shows rising momentum and a new yearly high, as does price.

However, on the Leadership indicator, using GLD as the benchmark, silver continues to underperform.

On the futures chart, while momentum improves there, it has yet to meet last December's peak of momentum-that could mean we have not seen anything yet on price.

So, to get excited from here, silver futures needs to clear back over $25.00 an ounce.

Nevertheless, silver (and gold) should have your attention.

ETF Summary

  • S&P 500 (SPY) 510 pivotal-as in below could see more correction
  • Russell 2000 (IWM) Once NVDA reversed, the market spooked-205 area support to hold
  • Dow (DIA) 385 support 400 resistance
  • Nasdaq (QQQ) 435 key support
  • Regional banks (KRE) 45-50 range
  • Semiconductors (SMH) Nasty bearish candle, so maybe we are ready to see levels back down to 208
  • Transportation (IYT) 69 area now support
  • Biotechnology (IBB) 140-142 resistance 135 support
  • Retail (XRT) 73 support
  • iShares iBoxx Hi Yd Cor Bond ETF (HYG) 77 big number to hold (still)

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