Silver Forecast: No Massive Rally in the Cards

September 9, 2021

silver bars

I’ve been warning that silver would likely invalidate its recent comeback above its previous lows, and it did exactly that. The decline is now likely to resume.

It is a particularly interesting phenomenon present on the silver market that its price tends to soar relatively to gold, and at times breaks above certain technical resistance levels just before turning south and starting a major decline. We saw this kind of behavior multiple times in the past and also very recently.

Remember when silver formed this year’s high at the beginning of February? It did so while outperforming gold and while breaking above the previous highs. Did this trigger a massive rally that so many people claimed was inevitable? No. That was the yearly top.

And a more recent example – remember the August 4 rally in silver that took it much higher and above its June lows? That happened right before the biggest short-term decline of the recent months. And yes, that day when silver supposedly broke the previous highs was the top. Higher silver prices have not been seen since that time.

Fast-forward to the most recent developments. We have silver that rallied particularly visibly relative to gold, and it broke above its previous 2021 lows. It also just invalidated this move this week. What’s likely to happen next? The history is likely to rhyme, and silver is likely to decline significantly, most likely taking the rest of the precious metals market with it.

The fact that the USD Index is about to soar based on its broad inverse head and shoulders formation only adds credibility to the above scenario.

Despite the late-August decline, the USDX recovered and is clearly back above the neck level of the previously completed pattern. The implications are bullish for the USDX and bearish for the precious metals sector, which are usually moving in the opposite direction to the USD Index.

Gold hesitated after declining earlier this week, but there’s a good technical reason for it – it paused after reaching two declining support lines: the black line that also stopped the rally for a brief time in early August, and the red dashed line. Just as we saw in early August, this support is unlikely to prevent the declines for long.

Meanwhile, mining stocks didn’t do much yesterday – they declined only slightly. However, the thing that I would like to draw your attention to today is the sell signal from the Stochastic indicator. It’s yet another indication that on a short-term basis we’re seeing a repeat of what we saw in early August.

All this is very bearish, especially given the major post-U.S.-Labor-Day cyclicality in gold that I discussed yesterday and last week.

Summary

To summarize, even though we saw a sizable upswing on Friday (Sept. 3), it doesn’t seem to have changed anything with regard to the bearish medium-term trend in the precious metals market. The key breakdowns / breakdowns were either not invalidated (euro, USD Index, silver, GDXJ) or were invalidated in a way that’s suspicious / in tune with what happened during the powerful 2013 slide (GDX, HUI Index).

And as silver often moves in close relation to the yellow metal, when gold falls, Silver is likely to decline as well – it has probably already started its slide. The times when gold is continuously trading well above the 2011 highs will come, but they are unlikely to be seen without being preceded by a sharp drop first.

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Thank you.

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Sunshine Profits - Effective Investments through Diligence and Care

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All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

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Man has had the ability to separate silver from lead for as far back as 4000 B.C.

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