Silver, the precious metal often overshadowed by gold, has been building a massive base against several major currencies for the past three years. A breakout from such a large consolidation pattern could signal a powerful rally ahead, especially given the current macroeconomic backdrop. According to a recent article on Seeking Alpha, silver has the potential to outperform gold and other assets in the coming years.
Silver vs. US Dollar: A Bullish Breakout In The Making
One of the most important charts to watch for silver investors is the long-term chart of silver against the US dollar. As the article points out, silver has been trading in a wide range between $14 and $30 since 2014, forming a huge cup-and-handle pattern. This is a bullish continuation pattern that often precedes a strong uptrend.
The article notes that silver has recently broken above the neckline of the pattern, which is around $26.50, and is now testing the resistance zone of $28-$30. A decisive breakout above this zone would confirm the completion of the cup-and-handle pattern and open the door for much higher prices. The article projects a potential target of $50-$60 based on the depth of the cup.
Silver has already outperformed gold this year, gaining about 15% compared to gold’s 3% decline. This suggests that silver is gaining momentum and relative strength as investors anticipate higher inflation and economic growth. Silver is not only a hedge against currency debasement, but also an industrial metal that benefits from rising demand in sectors such as renewable energy, electric vehicles, and electronics.
Silver vs. Other Currencies: A Global Phenomenon
The article also shows that silver is breaking out of multi-year bases against other major currencies, such as the euro, the British pound, the Canadian dollar, and the Australian dollar. This indicates that silver’s strength is not just a function of US dollar weakness, but a global phenomenon driven by fundamental factors.
The article argues that silver is undervalued compared to gold and other assets, such as stocks and real estate. The silver-to-gold ratio, which measures how many ounces of silver it takes to buy one ounce of gold, is currently around 75, well above its historical average of 55. This means that silver is cheap relative to gold and has more room to catch up.
The article also compares the performance of silver to the S&P 500 index and the US housing market index over the past decade. The results show that silver has lagged behind both markets significantly, implying that silver is underowned and underappreciated by investors. The article suggests that this could change as silver attracts more attention and capital in the future.
Silver: A Bright Outlook For The Future
The article concludes by stating that silver has a bright outlook for the future, as it stands to benefit from several tailwinds. These include:
- Rising inflation expectations and negative real interest rates, which erode the purchasing power of fiat currencies and boost the appeal of hard assets.
- Increasing fiscal stimulus and infrastructure spending, which create more demand for silver as an industrial metal.
- Growing adoption of green technologies, such as solar panels and electric vehicles, which require large amounts of silver for their production and operation.
- Limited supply growth and declining ore grades, which constrain the availability of silver and create a supply-demand imbalance.
- Rising social unrest and geopolitical tensions, which increase the demand for safe-haven assets.
The article advises investors to consider adding exposure to silver through various vehicles, such as physical bullion, exchange-traded funds (ETFs), such as the iShares Silver Trust (SLV), or mining stocks. The article warns that silver is a volatile asset that can experience sharp corrections along the way, but maintains that the long-term charts point to a potential for an explosive breakout.
