Silverado! Silver Playing Catch-up As Precious Metals Rise On US-Russia Tensions

by confoundedinterest17

With President Biden rattling his saber at Russia and imposing sanctions, while Biden is sending warships to the Black Sea, it seems like a good time to buy gold and silver.

After the silver-gold ratio hit a record low in March, the cheaper of the two precious metals has broken technical levels that raise the prospect of a new era of out-performance.

Silver Broke a Multi-Year $7.5 Trading Range.

Silver prices have doubled from their low four months ago to reach a seven-year high, as a resurgence in coronavirus cases, slowing economic growth and a weak U.S. dollar sparked demand for havens. Silver is rebounding from a record low ratio to gold and only this month managed to break out of a narrow trading range that lasted six years.

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Multi-year trading ranges represent coiled volatility that once broken can see explosive moves, with the range width acting as an initial technical target. Silver’s breakout above $20-$21 may see it target $29 (the sum of the $7.5 range since 2014 and the resistance level just taken out.)

Next to consider the shift seen in the silver-gold ratio.

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The first panel shows silver has lagged gold, while the second shows the silver-gold ratio rebounded after reaching a record low in March. Notice in the bottom panel that drops of more than 2 standard deviations in the ratio kicked off sharp outperformance for silver.

The era of central bank monetary debasement has ushered in a period of precious metals out-performance over equities.

A closer look at M2 Money and Gold, Silver in the days of Covid.

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