Silver underlying support, wave count, and target of $34+
Updated
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Big fan of silver as a way to gain leverage over an increasing gold price. So where to we sit currently?
- After a huge (~+150%) run-up From March to mid 2020 (depending on the chart source - some charts (like this one put the local high at Feb '21) silver entered a period of mostly sideways consolidation.
- The goldsilver ratio has swung dramatically, from over 120:1 in March 2020 to a low of 62.5 in Feb '21 and since then has had a mild up-trend and now sits at around 72:1. Of late, silver has performed unfavourably versus gold.
- The US Fed rate (which is updated tomorrow) currently sits at 0.25% - unchanged since March '20 (investing dot com forecasts no change at that next meeting).
- US monthly Inflation numbers (depending on the source) indicates inflation on the rise (fred.stlouisfed.org/series/FLEXCPIM679SFRBATL) Which will mean that low-yielding long-term government debt will stay neutral or below inflation and possibly move to a even greater negative real yield (Presently 1.3% US10y yield less 5% (5% taken from investing dot com) inflation is presently a -3.7% real yield)). If you take the CPI numbers (fred.stlouisfed.org/series/FPCPITOTLZGUSA) the real yield is almost exactly ZERO - not negative, but not exactly attractive (and also not protective to the holders in the eventuality of continued rising inflation)
- US Federal debt (on balance sheet anyway - off balance (or "unfunded") sheet debt is around 5 times higher) rose 21% since the start of 2020. I don't think it is a controversial statement to say that this level of debt will be a significant future challenge to service unless interest rates stay depressed medium to long-term and the principal is repaid in significantly depreciated currency).
Ok, there is more, but the general case for silver remains intact and the outlook for gold and silver remains medium to long-term bullish. So, what is next?
I put a possible wave count for silver and some possible support levels. I especially pay attention to areas where a number of different areas of support converge; e.g. peak or trough support, fib extension / retracement levels, trend-line etc. So we seem to have one of those levels approaching with;
- The 0.382 for the full 2020 move seeming to provide strong support,
- Fib extensions almost perfectly hit the 1.618 before bouncing three times now,
- Lower trend-line support isn't too far below current prices at around 23 (this isn't a strong trend-line as there are only two points - but the larger price trend forms a generally symmetrical triangle with around 6 points of contact),
- Seemingly strong level support sits at 23.781 and is coincident with other smaller areas of support,
- I don't expect we will see prices below $24.
The only reason why I don't point to Elliot Wave as indicating a local bottom at the current swing low is that I see another small wave down to end the current correction.
Importantly, I am starting to see some RSI bullish divergence on the 4hrly - which is also evident on the daily chart. I definitely pay attention when the RSI starts to form higher lows while the price heads lower. It's a good time to think about getting in or out - or at least scaling in / out / taking profit. At a minimum it shows a slowing in the price momentum.
So, to continue my Memoirs :) I am not looking to the next Fed rate decision - unless they suddenly hike it to above 3% (which is basically impossible now if the US is ever to service is current (and fast expanding) public debt) - the long-term case for gold and silver remains in place. I posted yesterday that I can see, one of the possible future scenarios being $2140 gold in the near-term (an 18.5% rise) and silver could conservatively be expected to double that % rise which would put it around 34/oz.
Best of luck everyone, and protect those funds.
Big fan of silver as a way to gain leverage over an increasing gold price. So where to we sit currently?
- After a huge (~+150%) run-up From March to mid 2020 (depending on the chart source - some charts (like this one put the local high at Feb '21) silver entered a period of mostly sideways consolidation.
- The goldsilver ratio has swung dramatically, from over 120:1 in March 2020 to a low of 62.5 in Feb '21 and since then has had a mild up-trend and now sits at around 72:1. Of late, silver has performed unfavourably versus gold.
- The US Fed rate (which is updated tomorrow) currently sits at 0.25% - unchanged since March '20 (investing dot com forecasts no change at that next meeting).
- US monthly Inflation numbers (depending on the source) indicates inflation on the rise (fred.stlouisfed.org/series/FLEXCPIM679SFRBATL) Which will mean that low-yielding long-term government debt will stay neutral or below inflation and possibly move to a even greater negative real yield (Presently 1.3% US10y yield less 5% (5% taken from investing dot com) inflation is presently a -3.7% real yield)). If you take the CPI numbers (fred.stlouisfed.org/series/FPCPITOTLZGUSA) the real yield is almost exactly ZERO - not negative, but not exactly attractive (and also not protective to the holders in the eventuality of continued rising inflation)
- US Federal debt (on balance sheet anyway - off balance (or "unfunded") sheet debt is around 5 times higher) rose 21% since the start of 2020. I don't think it is a controversial statement to say that this level of debt will be a significant future challenge to service unless interest rates stay depressed medium to long-term and the principal is repaid in significantly depreciated currency).
Ok, there is more, but the general case for silver remains intact and the outlook for gold and silver remains medium to long-term bullish. So, what is next?
I put a possible wave count for silver and some possible support levels. I especially pay attention to areas where a number of different areas of support converge; e.g. peak or trough support, fib extension / retracement levels, trend-line etc. So we seem to have one of those levels approaching with;
- The 0.382 for the full 2020 move seeming to provide strong support,
- Fib extensions almost perfectly hit the 1.618 before bouncing three times now,
- Lower trend-line support isn't too far below current prices at around 23 (this isn't a strong trend-line as there are only two points - but the larger price trend forms a generally symmetrical triangle with around 6 points of contact),
- Seemingly strong level support sits at 23.781 and is coincident with other smaller areas of support,
- I don't expect we will see prices below $24.
The only reason why I don't point to Elliot Wave as indicating a local bottom at the current swing low is that I see another small wave down to end the current correction.
Importantly, I am starting to see some RSI bullish divergence on the 4hrly - which is also evident on the daily chart. I definitely pay attention when the RSI starts to form higher lows while the price heads lower. It's a good time to think about getting in or out - or at least scaling in / out / taking profit. At a minimum it shows a slowing in the price momentum.
So, to continue my Memoirs :) I am not looking to the next Fed rate decision - unless they suddenly hike it to above 3% (which is basically impossible now if the US is ever to service is current (and fast expanding) public debt) - the long-term case for gold and silver remains in place. I posted yesterday that I can see, one of the possible future scenarios being $2140 gold in the near-term (an 18.5% rise) and silver could conservatively be expected to double that % rise which would put it around 34/oz.
Best of luck everyone, and protect those funds.
Note
Meh
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