It’s been an impressive first half of Q4 thus far for the precious metals complex, with silver (SLV) leading the way, up 12% for the quarter, tacking another 4% in November alone. This solid performance has helped the metal claw back some of its year-to-date losses, with SLV now down ~6% for the year vs. nearly 20% decline at its October lows. The recent outperformance has also helped silver to reclaim its key weekly moving average relative to the S&P-500 (SPY), with the Silver/S&P-500 ratio looking like it may have just made a double bottom.It’s been an impressive first half of Q4 thus far for the precious metals complex, with silver (SLV) leading the way, up 12% for the quarter, tacking another 4% in November alone. This solid performance has helped the metal claw back some of its year-to-date losses, with SLV now down ~6% for the year vs. nearly 20% decline at its October lows. The recent outperformance has also helped silver to reclaim its key weekly moving average relative to the S&P-500 (SPY), with the Silver/S&P-500 ratio looking like it may have just made a double bottom. Between a backdrop of negative real rates, and violent underperformance over the past nine months for silver, the ingredients are in place for a very strong year in 2022. Let’s take a closer look below:
(Source: TC2000.com)
As the chart above shows, silver has been in a steep downtrend over the past year vs. the S&P-500 but recently found some support at a major support level. This is the same level where this ratio bottomed in late 2018. Since attempting to hammer out a bottom, the Silver/S&P-500 ratio has climbed back above its short-term moving average (red line), a positive sign suggesting a potential change in momentum. If we look back over the past three decades, silver’s best performance has come when it’s only been leading the price of gold but also the S&P-500, and this recent shift in momentum is a positive development thus far. The key to confirming this, though, is for the Silver/S&P-500 ratio to move above its long-term trend line as well, which would require a dip in the S&P-500/Silver ratio to 170 or lower. This will be a level to monitor as we head into the back half of Q4.