Silver Prices: Last Time This Happened, Silver Soared 1,328%

Silver Prices2 Charts You Shouldn’t Look Away From if You Own Silver

Put in simple words, if you are not paying attention to silver prices now, you may be kicking yourself a few years from today. The gray precious metal has shown solid gains so far in 2016 and more of the same could follow.

Before going into details, just looking at the following daily silver price chart, pay close attention to the red and blue lines.

Silver prices currently trade above their 200-day moving average (red line) and 50-day moving average (blue line).

You see, in technical analysis terms, these moving averages act as trend indicators. If the price trades above these moving averages, it means the long-term trend is pointing upwards.

Silver-spot Price CME

Chart courtesy of www.StockCharts.com

With this, remember the most basic principle of technical analysis: the trend is your friend until it’s broken. Silver prices are above these moving averages, suggesting the long-term and short-term trend is in favor of the bulls.

This isn’t all; there are more reasons to be bullish on silver prices going forward.

Here’s another chart you should be paying attention to. It shows the correlation between the S&P 500 and silver prices.

silver Price CME

Chart courtesy of www.StockCharts.com

In the chart above, I want you to pay attention to two places: between 1991 and 1994 and between 2013 and now. In these sections, you will notice something interesting. Between 1991 and 1994, the correlation between silver prices and the S&P 500 collapsed to almost negative one. In the midst of this, we saw silver prices make a bottom around $3.50 an ounce. This point was never tested again.

Moving forward to today, the correlation between silver and the S&P 500 is now almost negative one—meaning they are moving in the opposite direction. This begs me to ask two questions: 1) are we in the midst of making another bottom in the silver market that we will never see again; and 2) are silver prices setting up to rally big-time?

Last time silver prices and the S&P 500 had an almost perfect negative correlation, the precious metal witnessed a rally of 1,325%—soaring from around $3.50 all the way to nearly $50.00 an ounce.

Silver Prices Outlook for 2016; Great if You Own It

Dear reader, the odds of silver prices spiking higher are stacking up each day. Those who were bearish on the gray metal have changed their tone as well. We are no longer hearing the arguments that buyers will run away, silver is headed back to $5.00, or the precious metal is useless for the portfolio.

In fact, we are now hearing how the momentum in silver prices could continue for some time—a 360-degree change in opinions, as I see it.

Here’s how I am looking at all this: The gray precious metal was ignored for way too long. Investors are finally starting to realize that silver has been oversold and they are buying. As silver prices move higher, we are going to see many more buyers come in. We could be at the beginning of another bull run in the silver market.

With all this said, I still favor silver mining companies. As silver prices have increased 25%, a few of the silver companies that I follow closely have generated returns of three times that or more.