Yesterday, I published an update on silver, highlighting the prevailing pessimism and frustration among retail investors. In contrast, I expressed a bullish outlook and noted that silver’s post-Thanksgiving breakout on November 28th remained firmly intact. I also pointed out a bull flag pattern forming on the chart, which is a technical setup that typically signals a continuation of an uptrend once it breaks out. Less than 24 hours after that update, the breakout occurred, just as expected. I’m writing this quick follow-up to show you what happened and what I anticipate next.
Let’s start with COMEX silver futures, which surged nearly 5% today to a fresh all-time high of just over $61, breaking out of the bull flag pattern decisively on strong volume. This is a positive development that indicates a strong likelihood of further gains in the near term. It is also important that volume was strong today, as it confirmed the breakout. I explained the importance of watching for strong volume on breakouts in a recent tutorial.
Today’s breakout is the second in the past couple of weeks, with the first being the breakout from the ascending triangle pattern that formed in October and November.
As I pointed out in yesterday’s update, bull flags can be used to project a price target following a breakout, using a principle known as the measured move. In this case, the move leading into the pattern was $12. When projected upward from the top of the pattern at $60, it gives a price target of $72, which is not far-fetched given that it is only about 17% higher than the current price.
Keep in mind that $72 is only an immediate short-term price target. As I explained in this report, I ultimately expect silver to reach several hundred dollars per ounce over the course of this secular bull market.
What I find fascinating about the $72 price target generated by the recent bull flag is that it perfectly matches the projection I made weeks ago in my November 20th report. That earlier estimate was based on a prospective breakout from the ascending triangle that formed in October and November as shown in the chart below.
The fact that both targets are identical, despite being derived from different chart patterns, greatly increases the likelihood of it playing out. It’s also another example of the mysterious principles at work in financial markets that I’m still trying to fully understand.
When I first issued that $72 price target weeks ago, silver was trading at around $50 and struggling to hold above it. At the time, many people thought the target was overly optimistic and that I was going out on a limb. But now, with silver just 17% away, it’s looking increasingly realistic.
I also like to look at silver priced in euros because it removes the influence of U.S. dollar fluctuations and reveals silver’s underlying strength.
As with COMEX silver futures, which are priced in dollars, silver priced in euros broke out of its bull flag. This gives added confirmation that the strength is in silver itself and not due to dollar weakness, especially since the dollar barely moved today.
Next, let’s move on to silver miners, starting with the Global X Silver Miners ETF (SIL), which surged roughly 5% today, similar to silver itself.
Many mining stock investors have lamented that silver miners have recently lagged behind the price of silver, and that is true. However, I believe they are like a beach ball being held underwater and are poised to play catch-up in a big way once SIL closes decisively above its $80 resistance level on strong volume. With silver taking off again, this move is likely to occur in the next few days.
I am extremely bullish on silver miners and invest heavily in them myself through ETFs. I believe the widespread and persistent retail investor pessimism surrounding them is misplaced and short-sighted, driven by a lack of understanding of the bullish dynamics at play, as I explained in this detailed report.
Like SIL, the Amplify Junior Silver Miners ETF (SILJ) has been in a trading range, but a solid high-volume close above the $27 resistance level should kick off the next leg of the bull market in both the SILJ ETF and the broader junior silver mining sector.
One of the main sources of frustration for silver investors during the precious metals bull market of the past couple of years has been gold’s strong performance relative to silver. This drove the gold-to-silver ratio as high as 107 this past spring.
What many investors do not realize is that this behavior is typical during the early stages of a bull market in precious metals. When a new precious metals bull market begins, as it did two years ago, investors often take a cautious approach, favoring gold for its relative stability over silver’s greater volatility.
As the bull market progresses, however, investor confidence grows, the price of gold reaches elevated levels, and silver attracts greater interest, leading it to outperform gold. This is exactly what occurred during the bull markets of the 1970s and 2000s and it is now happening once again. Since the summer, silver has started to outperform gold, causing the gold-to-silver ratio to sink like a rock to 69.3.
A look at the gold-to-silver ratio chart going back to the late 1990s shows that the ratio has returned to levels consistent with the average of the past several decades. What’s notable is that in November, the ratio fell below an uptrend line that dates back to 2011, which indicates that it’s now silver’s time to shine.
I am currently watching the 64 to 68 support zone, as a solid close below that zone would likely indicate a further acceleration of silver’s bull market. This is in line with the projection for silver to reach $72, and ultimately much higher later on, as I expect.
A look at the gold-to-silver ratio over the past century shows that the historical average is 53, and there is a good chance we will return to that level and even overshoot it during the course of this silver bull market.
To put that into perspective, if gold reaches $5,000, which is a reasonable projection for 2026, and the ratio returns to its historical average, that would imply a silver price of $94 per ounce. This represents an impressive 54% increase from today’s closing price. While it may sound ambitious, I can easily see that happening within the coming year.
To summarize, as a silver bull, I’m encouraged by today’s breakout above the bull flag pattern, especially because it occurred on strong volume. That indicates that the next leg of silver’s bull market is firmly underway. However, it’s important to keep in mind that Wednesday is an important Fed meeting, where the Fed is expected to cut rates by 25 basis points, or 0.25%, and provide forward-looking guidance on future monetary policy.
This meeting introduces a wildcard element and brings a high likelihood of market volatility. I will be watching to see whether silver can hold its ground and maintain this breakout through the event, and I’ll continue keeping you updated on what I’m seeing.
All investments carry risk, and past performance is not indicative of future results. Readers should conduct their own research and consult with a qualified financial advisor before making any investment decisions. The author and publisher disclaim any liability for financial losses or damages incurred as a result of reliance on the information provided.
Source: Thebubble
