Silver Prices Setting Up to Rally Big Time
Silver prices are up nearly 25% year-to-date, but don’t for a second think that’s it for the precious metal’s gains. There could be much more upside ahead for the gray precious metal.
Before I go into any of the details, just look at the chart below and pay close attention to the circled areas.
Chart courtesy of www.StockCharts.com
The blue line plotted on the chart above is the 200-month moving average for the silver prices.
You see, I see this moving average as being very powerful. If silver prices remain above this moving average, we will see years of higher prices. If they fail to break above it, we will see declines.
Looking at the chart above, in 1998, silver prices failed to break above the 200-month moving average. This resulted in silver prices remaining stagnant for several years.
Later, in 2003, silver prices broke above this average and we saw a massive rally.
Fast-forwarding to today, not too long ago, we saw the precious metal’s price level flirt with its 200-month moving average—and it didn’t break below. As a matter of fact, the silver price bounced off its moving average very quickly.
This is bullish.
The last time silver prices crossed above the 200-month moving average, we saw prices go from $5.00 an ounce to close to $50.00 an ounce. I question if we will see something similar this time around.
Last time, silver prices moved more than 900% higher after crossing that key moving average.
This time, the 200-month moving average stands at $14.51 per ounce. A 900% increase from that level would mean a silver price of $130.59 per ounce!
Could it really get there? It could.
Keep in mind that the 900% increase in silver prices didn’t happen over one month or even over one year—it took several years to get there.
Mind you, technical analysis isn’t the only evidence that suggests silver prices are setting up to skyrocket. The basic fundamental data suggests the same.
As it stands, we are seeing a significant amount of constraints on the supply side, while demand remains solid.
Consider Mexico’s silver production, for example. Mexico is the biggest silver-producing nation in the world. In February of 2016, Mexico produced 350,204 kilograms of silver. (Source: “Value and volume production of Silver,” Servicio Geológico Mexicano, last accessed May 18, 2016.)
Compared to a month ago, silver production in February was down more than nine percent. And year-over-year, silver production in Mexico was down 12.4%.
With silver prices up by a solid amount in the first few months of 2016, one would assume mines would be producing more. That way, they could sell more at higher prices. This didn’t happen…
If You Think Silver Will Soar, Here’s Where You Should Look
Dear reader, here’s what I know: silver and silver-related investments like mining companies have been oversold. They now present one of the best opportunities out there. The risk-to-reward ratio on them is simply amazing. I will even go so as far as to say this: you could be making a big mistake if you ignore them.