Silver Prepares For Next Leg Higher
Chris Vermeulen | Jan 31, 2020 02:46AM ET
Following up on some of our recent metals research, we are seeing significant opportunity in silver: we believe the metal continues to be one of the most incredible opportunities for 2020 and silver miners (NYSE:SIL) could explode to the upside as the price of silver rallies to close the gap between the gold to silver ratio.
Our researchers believe silver is currently undervalued, compared to gold, by at least 240%. Historically, the gold to silver ratio averages a 10+ year rotational range of between 63 to 67. This means that through both peaks and troughs, ranging from the high 80s to mid-90s to the low 30s to mid-40s, on average the middle price range level for this ratio is near 65. Currently, this gold to silver ratio is 88.4.
Gold is currently trading at $1590 – just below the recent peak near $1613. We believe the yellow metal will continue to rally higher, breaking the $1613 level, and continue higher targeting the $1750 level over the next few months. Eventually, within 2020, we believe gold will continue to rally higher breaking the $2100 price level.
This continued upside price action in gold, while silver has really yet to see any massive upside price movement, continues to create a massive price disparity between gold and silver – which is highlighted in the gold to silver ratio. As gold rallies, silver must begin to move dramatically higher in order to close this price disparity between the value of gold to silver. Historically, we believe the rally in silver will force the gold to silver Ratio to fall to near the 65 level. This would represent a massive 70% to 120%+ rally in the price of silver – targeting $24.50 to 32.50.
If the gold to silver ratio falls below the 65 level and targets lower ratios, as has happened in the past, then silver may rally as high as $45 to $55 per ounce while Gold stays below $1800. If gold does rally above $2000, as we expect, the true potential for silver experiencing a major price reversion event could be as high as $60+ per ounce.Please take a minute to read some of our previous research posts regarding the metals markets here:January 14, 2020: METALS & MINERS PREPARE FOR AN EARLY 2020 LIFTOFF
h3 Daily Price Of Silver Chart/h3
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This Daily Silver chart highlights what we believe will be the next move higher in silver. The next upside price advance should target the $21 to $23 level as silver attempts to revalue compared to the price of gold. Near this $23 level, silver should stall briefly before attempting to move much higher. The reality is that once this revaluation event begins to take place in silver, we believe it will prompt an extended price rally that could last well into 2023-2024.
This Weekly Silver chart highlights our research team’s expectations related to silver over the next 6+ months. At first, we believe the $21 to $23 level will become the target. Then, a short period of price rotation will find support near $21 before another upside price leg pushes silver above $24. Remember, if gold continues to rally higher, these expectations could extend 5% to 10% in size and scale.
h3 Silver Miners Sector ETF – Weekly Chart/h3Another key component of this move is the opportunity in silver miners. This SIL Weekly chart highlights the real potential for a 20% to 30% upside price rally related to the expected price revaluation/reversion event we have been describing for silver. Miners are an excellent correlative component for skilled traders expecting a move like this in the metals market.
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