Silver has its racing shoes on, and it is pulling away from the pack. Take a look at the year-to-date performance of silver, gold and the S&P 500.
The S&P 500 is up 5.77%, riding a wave of Trump-mentum. Gold is doing better, with an 8.47% gain. But silver is sprinting, with a 13.5% gain.
If silver keeps up this pace, that would work out to a 65% gain for the year.
Now, there’s nothing to say silver must keep up that pace. It could slow down. Then again, it could speed up. We’re in a new precious metals bull market, after all.
Importantly, silver is at a critical point. Let me show you another chart of silver, as tracked by the iShares Silver Trust (SLV).
You can see that silver gapped higher on Monday, jumping right to its 200-day moving average. Now, it is testing its big downtrend from August.
Silver made that gap higher on strong volume. That’s bullish, too.
It’s likely that one of two things will happen here:
The less-likely thing is that silver will plow through that overhead resistance like a rampaging bull. I say less likely, but the metals have surprised us for months.
The OTHER thing that could happen is silver could pull back to test its uptrend, which I’ve marked as a blue dotted line. If silver does that, I’ll be happiest.
Why? Because more coiling up means the eventual explosion higher will only be bigger. A pullback will also be an opportunity to pile into miners with exposure to silver.
Fundamentally, what’s powering this move?
Silver is Rare. Pure-play silver mines are precious indeed. Most silver comes as a byproduct of other metals. That means silver production can’t be cranked up to meet rising demand.
Peak Silver. In fact, production from silver mines peaked in 2015, according to GFMS Thompson Reuters. And it should keep going down. We’ve hit "Peak Silver."
Solar Surge. Silver is an industrial metal as well as a precious metal. Industrial fabrication makes up about 50% of silver demand each year, vs. less than 10% for gold demand.
Silver is used for all sorts of things, from wiring in cell phones to chemical reagents to the paste used in solar cells.
Many industry analysts thought solar demand for silver was peaking. That turns out not to be the case.
Prices of solar modules are falling as the industry becomes more efficient. That is stoking demand, especially outside the U.S. And that’s pointing the way to more silver consumption.
Weaker Dollar. Just like gold, silver straddles the "Seesaw of Pain" with the greenback. When one goes up, the other usually goes down. Now, the dollar appears to have peaked. And that opens the door to higher silver prices.
I hope we get that pullback in silver. It would be a buying opportunity. Silver is ready to run — the starter pistol is cocked. The race is beginning, and silver could take the gold.
Investors should get out of the way, or ride this rally for all it’s worth.
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