By David Smith
Two realistic price movement scenarios can see silver finally ascend through the magnetic $50 level in 2022. A case can be made that either – or perhaps both – have a strong likelihood of taking place.
In December, silver moves up from a strong multiple-year base, with an impulse leg-driven First Quarter, punching through strong resistance and spiking into the low ‘$40’s before retreating to its breakout just above $30.
It builds a broad $15 sideways HSR (horizontal support-resistance) price box between $43 and $28.
Volume strengthens on up days, and lessens on down days, creating a descending technical triangle.
In April, silver breaks out of its four-month coil and drives into new multiple year highs between $44 and $55 per ounce, creating spikes above $50, but without managing three closes (above a given price, in this case the historic $50) David Morgan looks for to validate a bullish (or bearish) impulse leg breakout.
In mid-June, physical silver gives up the ghost and retreats into a seasonal July-August double bottom.
Many long-term silver bulls lose hope as the “triple top” (1980, 2011, and 2022) they see causes them to conclude that silver prices will “never” rise and stay above $50 during their lifetimes.
Metals and miners wash out into the fall of 2022, as the last weak hands are “worn out or scared out,” even as silver consolidates for a fourth – and this time successful assault on $50.
In the second scenario, silver, having retreated toward its $30 breakout early in the year, yet unable to leave $50 behind, churns in a frustrating triangular fashion.
Meanwhile, new, subtle, but sustained physical buying comes in late in a session on any breakdown in price.
Large money siphons off increasingly scarce physical inventory like what happened in late October 2021, when a metals’ dealer colleague shared with me that he had just taken “a test order” from a new customer… for five million dollars!
The silver price is coiling; the spring is tightening… Those who read this column have heard the litany of supportive factors, but there are two more that may slip beneath people’s radar.
A Technical Indictor:
In several decades of following “the restless metal”, one powerful “technical tell” – what I call “the fourth time indicator” – stands out. It’s when a price challenges either upside resistance or downside support for the fourth time.
A classic example of this took place as what would become a 5-year cyclical bear market built out from the 2011 upside failure and touched $26 silver for the fourth time.
I remember getting a pit in my stomach, thinking, “It’s probably gonna’ go through… and keep dropping!” Which is exactly what it did.
A Physical Indicator:
The metals’ dealers I speak with tell me that virtually no significant quantities of gold and silver are coming back into the market.
Additionally, a tell I watch for is the availability – or lack thereof – of fractional ounce gold coins like the Canadian gold Maple (leaf) or the Australian gold Lunar.
Upon inquiring recently about 1/10th oz Canadian Maples, I was told, “Do not expect anything before late January 2022 at the earliest.” (Some American fractionals are available, but internationally less desired by dealers than their more easily resold cousins.
Silver has acted like this before. Jeff Clark’s talk at last fall’s Silver Symposium envisioning how the next silver bull run might unfold, was titled “From Boring to BOOM.”
Clark noted how silver actually declined for two years into 1976, during a time – as now – when inflation and unemployment were high, and there was an ongoing energy crisis. He had a dozen quotes “from the experts” read aloud, several from the venerable New York Times
Said one in the event by a less-than-a prescient observer: “Gold is headed below $100. Who wants to put money in gold and silver now?” Another: “Any argument against putting money into gold goes double for silver. Silver is fools’ gold!”
Clark described the current environment succinctly and eloquently. “We have a falling silver price, surrounded by catalysts.”
You may be a long-suffering holder whose dreams of a metal moon shot have been dashed too many times to count. (And yet silver in 2000 traded for less than $4.00 the ounce; rocketed to near $50 in 2011; and even today with a $3-$5/ounce bullion premium and $9-$12 for the American Silver Eagle versus the traditional $3, you’re still looking at a “30 handle.”)
What do you think will happen when one of those “catalysts” or some other unexpected factor collides with a jaded “nothing’s gonna’ change’” investment cohort, an unsuspecting public, and an asleep at the wheel manufacturing sector?
In conferences and essay columns like this one for Money Metals, I’ve said it before: Everyone knows the price of silver – look it up on an exchange or call your dealer. But No one on the face of the earth has even a rough idea of the value of silver.
My bet says that as we track the metal’s path to $50 in 2022, followed by an epic three-digit stellar shot in 2023-4, we’re all going to find out! If such is the case, which side of this bet will you be on?
David H. Smith is Senior Analyst for TheMorganReport.com, a regular contributor to MoneyMetals.com as well as the LODE digital Gold and Silver Project. He has investigated precious metals’ mines and exploration sites in Argentina, Chile, Peru, Mexico, Bolivia, China, Canada and the U.S. He shares resource sector observations with readers, the media, and North American investment conference attendees.
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