Silver, often referred to as a "restless metal," has a reputation for confounding both bulls and bears with its unpredictable movements.
Analyzing silver price movements requires a specialized approach. On the one hand, it is key to blend both long-term historical perspectives with short-term trends on the silver chart. On the other hand, it pays off to find supporting evidence across markets to confirm potential trends on the silver charts.
In this post, we examine the silver market through a top-down approach, comparing a 50-year historical price chart with a 5-year chart. We will also consider the silver-to-AUD ratio as an intermarket indicator, providing insights into potential future movements.
Note that the fundamental picture for silver remains attractive. As said in a recent post, demand for physical silver remains solid. Case in point: silver performance as a battery material as evidenced by Samsung’s silver battery revolution.
Long-Term Perspective: The 50-Year Silver Price Chart
The 50-year silver price chart reveals a compelling long-term pattern known as the "secular cup and handle."
This formation is characterized by a prolonged period of price decline (the cup) followed by a period of consolidation (the handle), ultimately leading to a strong breakout.
The secular cup and handle pattern in silver's price chart is remarkably extended, reflecting a secular cyclical trend. Over the past five decades, silver prices have been pre-dominantly flat with some temporary spikes up and down.
What stands out from this chart formation is the magnitude and duration of the pattern. It underscore its strength and potential implications for future price movements.
Historically, such patterns signal a substantial shift in market sentiment and can precede extended bullish trends.
Short-Term Perspective: The 5-Year Silver Price Chart
Zooming into the 5-year silver price chart, we observe a consolidation pattern at the secular breakout point which comes in right in the 27.70 to 28.80 USD/oz.
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This recent multi-year consolidation phase forms a bullish pattern, indicating that silver prices are preparing an upward move.
As with everything in life, the time must be right. As per Jean-Paul Sartre, French writer and philosopher:
"I believe that there is nothing stronger in life than something that is ready to happen."
This quote also applies to the silver price and market, maybe even more so than to any other financial market asset.
The short-term pattern aligns with the longer-term secular trend, suggesting that the current consolidation could be teeing up a significant rally.
The bullish consolidation observed on silver’s 5-year chart confirms the strength of the long-term bullish thesis.
From these chart patterns, it is clear that silver is preparing a move to 50 USD/oz. This may not start in the coming months, but rather in the first half of 2025. It looks like 50 USD/oz is acting as a strong magnet though.
Ultimately, after a triple test of 2025 over 45 years, it could well be that a silver rally to 100 USD/oz is in the cards, still this decade. While speculative, the psychological 100 USD mark is an ambitious yet realistic target but only in case market conditions are set right for a secular breakout above 50 USD.
Intermarket analysis: Silver to AUD ratio
An additional layer of analysis can be added through the silver-to-AUD ratio.
Historically, silver has exhibited a tendency to lead the Australian Dollar (AUD) higher. That’s because the AUD has a strong affinity with the commodity complex.
This relationship is crucial for understanding the interplay between precious metals and currency dynamics.
Currently, the silver-to-AUD ratio chart is showing signs of a bullish reversal. This suggests that silver may be setting the stage for an appreciation relative to the AUD. Such a reversal could indicate a strengthening of silver prices in the near term, further supporting the bullish outlook derived from the 5-year consolidation pattern.
The AUD is currently consolidating at a significant level, but the bullish reversal in the silver-to-AUD ratio highlights a potential divergence. If silver begins to outperform the AUD, it may serve as an early signal for a secular silver price breakout.
Silver – go physical
Given the volatility observed in silver’s long-term but more so short-term price charts, it becomes evident that holding physical silver is the most prudent strategy.
The restless and unpredictable nature of the ‘grey metal’ underscores the importance of a direct investment mindset, without the complications and risks associated with leverage.
Physical silver (or any other instrument that purely and only tracks the price of spot silver, backed by physical silver, without any form of leverage) serves as a hedge against market fluctuations; it also offers tangible value in uncertain times.
As silver continues to demonstrate its unique price behaviors and significant long-term potential, it’s crucial to consider owning the metal itself.
In light of these insights, the question remains: GOT (PHYSICAL) SILVER?
Conclusion
The analysis of silver prices through both long-term and short-term perspectives paints a clear picture for silver investors. The 50-year secular cup and handle pattern reflects a historically significant bullish trend, while the recent 5-year consolidation pattern suggests an imminent breakout.
Additionally, the bullish reversal in the silver-to-AUD ratio supports the thesis of a strengthening silver market.
Investors should consider both the historical context and current chart patterns when making investment decisions in the silver market.
NOTE – It is prudent to combine these insights with broader market analysis and individual risk tolerance when developing investment strategies.