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June 25, 2020 | 3 Charts Show Why This Precious Metal Is Set to Soar

Sean Brodrick

Sean is the natural resource analyst for Weiss Group. You can read his thoughts on gold, oil, cannabis, uranium and other natural resources at EdelsonInstitute.com

All eyes are on gold this week as the yellow metal pushed to a seven and a half year high yesterday.

That’s great news for my subscribers’ gold positions. While I expect gold to go much higher, that’s not the REAL breakout story in front of us. Nope. The metal everyone should be keeping their eyes on is silver.

Yeah, silver. Gold’s underappreciated little sister. Silver is also the drama queen of precious metals. When gold is down, silver lays face-down on the floor. And when gold is up, silver can zoom higher.

Gold is marching higher now. And silver … well, let me show you three charts.

No. 1. Ore Grades Are Dropping

As I’ve said before, miners are now putting into production deposits that they used to drive over to get to the good stuff. Gold and silver are depleting resources, and once the good stuff is mined, you have to look elsewhere.

The problem is exploration is not working out as well as the companies might hope. Fewer and fewer large, rich deposits are being found. As a result, ore grades are going down, and fast.


 

Looking at the top seven primary silver producers in the world, the average yield fell to a record low of six ounces per metric ton of ore in 2019. That’s down 54% since 2005.

This drop in ore grades means that miners pull more ore out of the ground to produce less silver. And that results in lower global silver production.

In fact, according to data from CPM Group, which puts out the Silver Yearbook, global mine production fell last year by 3.8%. This marks the fourth consecutive year that production from primary silver companies went down. Usually, when there is less of a commodity, prices go up.

And that brings me to my next chart.

No. 2. Silver Is Poised for a Breakout


 

There’s a lot going on in this chart. So, let’s break it down from top to bottom.

  • At the top, you can see overhead resistance. Silver still needs to punch through that.
  • It sure looks like silver is forming a “bull flag” pattern, like it did in April. The saying goes, “flags fly at half-mast.” If this pattern resolves successfully, it will lead to another breakout.
  • The 50-day moving average is about to cross above the 200-day moving average. That’s quite bullish.
  • Volume is strong.
  • And we recently got a daily “buy” signal on the Force Index, my favorite momentum indicator.

Add it all up, and it’s not a matter of “if” silver breaks out, but when.

But, wait, you say. Gold is already breaking out. Why not just stick with gold? I have one more chart for that.

No. 3. The Gold-Silver Ratio

The last time I ran this chart on March 7, I wondered if we were seeing a peak in the gold-silver ratio, which is one of the BEST indicators of a precious metals bull market. Well, wonder no more.


 

The gold-silver ratio peaked on March 16, at a nose-bleed level of 127. That was the highest level in nearly 30 years.

Why does this matter? Because history shows this ratio peaks just before silver really takes off. Gold goes higher … but silver goes higher, faster! In the past, a turn down from a peak in this ratio has signaled big bullish moves in both silver and gold.

To be clear, I don’t think you should own just silver, or just gold. I think you should own both. And you should especially buy miners leveraged to the metal.

There are plenty of ways to play this coming move. Two of them are the iShares Silver Trust (NYSE: SLV, Rated D), which will let you play the metal, and the Global X Silver Miners ETF (NYSE: SIL, Rated D+), which will let you play the miners leveraged to the metals.

ETFs are a good trading vehicle. If you want the biggest potential returns, you can buy individual miners. That’s what we’re doing in Gold & Silver Trader . I have a select list of silver miners that I think could knock it out of the ballpark. And we’ll play them for all they’re worth.

P.S. If you want to hear me talk live about gold AND silver — and offer up some red-hot picks — you can do that in two weeks. That’s when I’ll be doing a special presentation online for The MoneyShow. It’s on July 8. You can find out more by CLICKING HERE. It’s free! I hope to talk to you then.

All the best,

Sean

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June 25th, 2020

Posted In: The Edelson Institute

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