Silver patience will be rewarded | 12 Febr 2021
Silver Price Forecast relative to Long Term Monthly - Medium Term Weekly - Short Term Daily - and Hourly (not shown) data.
(Previous week in brackets)
|Trend||↑ (↑)||↑ (↓)||↓ (↓)|
|53 (52)||47 (45)||51 (35)|
Total allocation 50% (55%)
12 February 2021 close: Daily Silver risk weight since last October eyes like a stable heart rate oscillator whilst the price has moved from $22 to $27. Based on long term price comparisons with Gold, Silver has basically performed very similar to gold with a 27 months advance of around 80%. Similar as Gold, the Medium and Long term risk weight indicators look positive and we expect a rally towards our next target of $37 fairly soon. Precious metals are also in the picture, or will be soon, with the crypto community, simply because there is so much discussion on social/alternative media. If something goes wrong in crypto, which it surely will for some tokens, traders will also look for safehavens beyond other crypto tokens. Gold, Silver, Platinum and a few other commodities can become very sought after, hence safe to establish a physical position whilst fair pricing with acceptable margins is still available.
5 February 2021 close: Silver ended just a touch lower than on Jan 29, at 26.88, and after a turbulent 14% peak to bottom. The SLV squeeze story probably made many more people aware of the precious metals market in general and Silver in particular. Even though the precious metals market is huge, very few retail investors are interested to stay with it or even acquire a small amount due to relatively high cost of storage and very high trading margins from bullion traders. However, a GME type buy and 'Hodl' operation will not be necessary to wake up the Silver whales. Moving even a small amount of fiat currency into physical Silver today will make that happen if done by enough people around the globe. Silver for wealth preservation purchase is available from refiners and bullion dealers but supply is limited. Physical silver isx best purchased by opening an account with companies or exchange that covers your purchase with an exact of excess amount of physical silver stored relatively cheap and in bulk with the major storage companies. Storing physical metal outside of your own tax jurisdiction is important. Austria, Switzerland, Singapore, Australia and new Zealand are examples. USA, Canada and UK are not favored storage locations for legal and other economic reasons. A little bit of help requires just a few million people to acquire an average of 500 troy ounces and absorb a whole year of production. One year Silver production is about one billion ounces or 27 Billion dollars at this week's silver price. That is 3.3% of TESLA market cap. like Gold, Silver is a likely candidate commodity to restore trust in the world's major fiat currencies. Physical Silver is a Buy and Hold until further notice. No Change.
Silver risk analysis - Quarterly chart since 1971
Please visit a previous week comment to view a risk weight silver chart based on actual quarterly high-low-close pricing.
31 January 2021: Silver Quarterly risk weight has advanced towards 85. The more neutral shorter term timescales are likely to be pulled in by the strong quarterly continuation. This is a long term observation and short term corrective patterns will be part of this process. No Change.
31 December 2020: Silver price peaks as seen in the quarterly risk weight chart below tend to show risk levels well into the higher 90's. Current level of 79, in an uptrend, can be expected to see further follow through. As Silver is volatile and almost never ends a period at the high, Dec 31 2020 being an exception, a major price advance during Q1 2021 is unlikely to produce a significant overbought condition any time soon. For example: if Silver reached $40 and closes the quarter at $37, risk weight only increases to 85. If Silver rallies to 50 and closes at 42 risk weight actually declines to 77 on the quarterly time scale. The advance that started in 2016 has some way to go.
GOLD/SILVER Ratio Price Risk Analysis
(Previous week in brackets)
|Trend||↓ (↓)||↓ (↓)||↓ (↑)|
|6 (6)||18 (20)||45 (45)|
Total allocation 50% (55%)
Gold Silver ratio analysis
12 February 2021 close: The relative bearish divergence of Daily risk weight versus Weekly could trigger another move down in the ratio. Weekly risk has bullish divergence status and Monthly is in the deep oversold range. Not finished which means anything can still happen and fast. Several hourly closings at 66.30 or lower may trigger a move towards the recent low of 62.13 with Daily risk narrowing into oversold again. This 62 handle will be a level to watch for anyone with a heavier silver portfolio weight. At current price levels it is more important from a risk management perspective to own physical silver rather than looking for a more speculative weighting that could perhaps be more profitable in fiat terms. If we break 60 however, then 30 does become a serious target again.
5 February 2021 close: On Monday 1 Febr Silver speculators started buying in early Aussie trade and this continued deep into the European trading session with Silver/USD just breaking the $30 handle with the Gold/Silver ratio dropping to 62.00 and change. This means Gold/Silver has now reached our initial objective of 65.00 after having dropped more than 50% from the March 2020 high. A nice observation is the opening gap on Monday febr 1 versus the Jan 29 close on an hourly chart. That gap at 68.44 was filled on Febr 2 at 12:00 CET. That gap too has a 99% chance of getting filled. Where to go from here? Last week's strong breakaway rally has caused Daily risk to run up which looks to diverge against Weekly and Monthly risk. Irrespective of the intervention mechanism by bullion banks this larger market move early in the week and subsequent correction into the Friday close on 5 Febr gives a signal for potential Silver strength later this month. It technically favors an further drop of the Gold/Silver ratio into the lower 50's. Something clearly is cooking and silver is responding for a reason. There is enough historic evidence to not want to play short term movements but wait for more structural developments. This may be many months away. No Change to our slight overweight silver holding in our total precious metals allocation.
Platinum Silver ratio analysis
12 February 2021 close: This week we add the Platinum to Silver ratio analysis starting with Quarterly closing prices since the Gold standard for Cnetral banks was removed in 1971. 50 years of Platinum Silver ratio history which gives a further piece of assistance of how to approach a balanced distribution of Precious metals in the portfolio.
Click on the chart to open a full size light box. We know that Platinum has been the weakest of the precious metals since 2012. What is particularly interesting to notice on this Platinum Silver chart is that Platinum actually peaked against silver in 2003 and has been declining since making that spike bottom in March 2020. What is mnore interesting is that Risk weight is now bottoming at a much higher level (57%) against a much lower Ratio price of 37 in March 2020. That is massive bullish divergence which is likely to result in not only Platinum fully removing its divergence against gold from an equilibrium of around 0.88 but also starting to make up lost ground against silver. The 50 year quarterly average close of the Platinum/Silver ratio is 74. That is the average of 200 data points. Hence, the potential for Platinum to recover towards that average against Gold and Silver is substantial. Not a reason to go all in on Platinum but enough reason to maintain a low risk 30-35% allocation to Platinum in the Precious metals portfolio.