AGORACOM Small-cap Investor Relations Blog

Sponsor: Affinity Metals (TSX-V: AFF) a Canadian mineral exploration company building a strong portfolio of mineral projects in North America. The Corporation’s flagship property is the Drill ready Regal Property near Revelstoke, BC. Recent sampling encountered bonanza grade silver, zinc, and lead with many samples reaching assay over-limits. Click Here for More Info

• Silver is a precious metal with approximately 50% of the demand coming from industrial uses.
• It is a “high beta” play on the gold price, more sensitive to global growth and the inflation expectations.

I’m on record for a quite bullish call in gold one year ago. As of today, gold trades approximately 20 % or 300 USD higher.

In March 2019, I also tweeted that the silver/gold ratio probably made a low and that I expect silver to at least reach 20 USD in 2019. I was slightly too optimistic, silver made “only” 30 % and hit 19.75 USD.

I have a new strong opinion I would like to share with you.

• Silver is a precious metal with approximately 50% of the demand coming from industrial uses. It is a “high beta” play on the gold price, more sensitive to global growth and the inflation expectations.
• The relationship to gold in more detail: at the beginning of a new up cycle in precious metals, silver in general lags gold. Later in the cycle (especially at the end of a certain cycle) silver massively outperforms gold. After the peak, silver starts to underperform again.

After spending quite some time doing research, today’s situation in silver looks similar like late 2003 (blue arrow). But here are my observations:

• “History doesn’t repeat itself, but it often rhymes.” – Mark Twain
• The a-b-c is a typical bottoming process, with a retest of the lows (c), a price compression and a well-defined breakout (blue trendline). During this initial stage, silver rather underperforms gold (see 1 and 2 in the silver/gold ratio).
• Later silver consolidates above the 200-week moving average (blue box), pullbacks finding support at the moving average, exactly like in 2003. Meanwhile, the moving average flattens and even turned upward.
• The silver/gold ratio also put in a possible bottom and is close to breaking the dashed blue trendline (yellow box).
• If things repeat in a similar way, expect a huge up move in silver soon. A repeat of 2003-2004 would imply roughly 50 % upside within this year.

How I play it:

• I already have a position in silver, I will increase the position if silver is able to break and hold above 18.12 USD = higher low. (further confirmation if gold miners break out and the silver/gold ratio breaks the downward sloping trendline)
• Below 17.48 USD I reduce my position and stay rather defensive until silver is showing strength again.
• I personally use futures and I will probably add a call option (strike 18 USD; March 2021). For most people, a ETF like SLV is probably a good way to participate.

A word of caution:

• First, bold predictions often fail. The above mentioned is just my opinion (as of today).
• Further, history is only a guide. The move may take place later, is not as explosive as in 2003-2004 or will not take place at all.
• I see a possibility that the recent virus in China has a quite negative impact on global growth and on inflation expectations (S&P500 doesn’t believe it, but copper and oil do). A severe outcome would probably delay this trade setup. Remember, silver is very sensitive to inflation expectations.
• As already stated, just my opinion and not investment advice. Please do your own analysis. Investing/trading involves substantial risk of loss and is not suitable for all people.

SOURCE:https://vesrock.com/2020/02/16/big-opportunity-ahead-in-silver/

Sponsor: Affinity Metals (TSX-V: AFF) a Canadian mineral exploration company building a strong portfolio of mineral projects in North America. The Corporation’s flagship property is the Drill ready Regal Property near Revelstoke, BC. Recent sampling encountered bonanza grade silver, zinc, and lead with many samples reaching assay over-limits. Click Here for More Info

Silver has fared better than some of its metal peers against the backdrop of a disease-threatened global economy, in part because of its dual role as both a precious and industrial metal.

“The monetary value of silver underpins the vast majority of its price, and if the metal had only industrial demand working for it, the price would be under $5 an ounce,” says Gold Newsletter editor Brien Lundin. “Silver’s precious side means it will outperform industrial metals in the months ahead.”

Futures prices for silver, which settled at $17.497 an ounce on Feb. 12, have fallen by more than 2% this year. Silver hasn’t done as well as gold, which has seen futures prices rise by roughly 3% over the same period.

Gold has “risen on the back of monetary concerns, but that trend has been obscured by two geopolitical events,” Lundin says: the U.S. “dustup” with Iran following the U.S. airstrike that killed Iranian General Qassem Soleimani, and the coronavirus outbreak. Gold rallied on these geopolitical concerns, then fell as fears subsided. “Unfortunately for silver, that rising trend has not been clear enough to prompt speculators to bet on silver along with gold,” he says.

Still, silver has been spared the steeper declines experienced by other industrial metals, such as copper, which has fallen 7% this year.

China is the world’s second-largest consumer of silver after the U.S., and “the enhanced uncertainty in China surrounding the coronavirus fears is taking a toll on silver prices,” says Matthew Miller, an equity analyst at CFRA Research.

“While weaker industrial demand is likely to remain a headwind, CFRA predicts continued appreciation in safe havens in 2020, and we see a high probability that silver will outperform gold,” he adds.

This year, the market is likely to see continued growth in physical silver investment and in the commodity’s use as an industrial metal, according to The Silver Institute’s recently released views on the 2020 global silver market. “There will be times when silver will have to contend with issues, such as the current health crisis in China, which could hit that country’s economy hard,” the institute says.

However, silver’s use as an industrial metal accounted for just over half of total global demand in 2019, and growth in the metal’s “industrial offtake” is expected to resume this year, following two years of marginal losses, the institute says. It sees a 3% rise in silver industrial demand in 2020, with the electrical and electronics sector accounting for the bulk of the gains.

Meanwhile, investment in physical silver, in the form of silver bullion coins and bars, is set to climb for a third consecutive year, the institute adds.

“The international silver market is poised to experience higher silver prices in 2020, even coming off the 4% increase in 2019,” says Michael DiRienzo, executive director of the Silver Institute, which pegged the 2019 average at $16.21, based on the London Bullion Market Association silver price. Last year, a marked shift toward looser monetary policies—as the U.S.-China trade war fed concerns about the global economic outlook—underpinned silver, the institute says.

The institute projects this year’s average silver price at $18.40, which would mark a 13% rise from 2019 to a six-year high. “We base this on current global economic health and geopolitical uncertainties throughout important economies,” DiRienzo says. “Buttressing this forecast…is a return to silver industrial demand growth, coupled with a robust increase of 7% in silver physical investment.”

SOURCE: https://www.barrons.com/articles/why-silver-prices-are-poised-to-rise-even-more-this-year-51581678001

Sponsor: Affinity Metals (TSX-V: AFF) a Canadian mineral exploration company building a strong portfolio of mineral projects in North America. The Corporation’s flagship property is the Drill ready Regal Property near Revelstoke, BC. Recent sampling encountered bonanza grade silver, zinc, and lead with many samples reaching assay over-limits. Click Here for More Info

Whilst it must be frustrating for Precious Metals sector investors to watch Tech stocks continuing to “shoot the moon” while PM stocks have mostly done nothing, the chart presented below suggests that this situation won’t persist for much longer.

The 7-month chart for GDX shows it probably completing the Handle of a sizeable Cup & Handle continuation pattern. GDX has stayed above the support level shown as the Handle of the pattern has formed, which has allowed the earlier overbought condition at the start of the year to unwind and moving averages to catch up. Volume has eased over the past several weeks which is also a positive sign.

With respect to the timing of the next upleg, the valid Bowl pattern also drawn on the chart helps, for it shows that the price has consistently found support at the Bowl boundary since it started to form last August, and now that it is at it again, with the Handle of the Cup & Handle looking about complete, the time for a new upleg to start is believed to be at hand.

The longer-term 18-month chart for GDX shows what is meant by labeling the Cup & Handle as a “continuation pattern” rather than a Cup & Handle base, which of course follows a drop, for as we can see it has formed at a higher level following the steep runup last Summer. Calling it a continuation pattern means that it is believed to be a consolidation pattern that will lead to renewed advance. While it is expected to break to the upside shortly it should be noted that it would be an unwelcome development if it should drop below the low of the Handle, and also that a breach of the support shown at the lows of the pattern would be a seriously bearish development, although it is considered much more likely that it will soon break to the upside.

So, with the price at the right side of the Cup & Handle pattern, at the support of the Bowl boundary, at the rising 50-day moving average and at an important support level the time appears to be nigh for a new upleg to begin. In addition, the Bollinger Bands (not shown) are pinched together quite tightly suggesting that a big move is imminent and the dollar is in position to reverse to the downside after a run.

SOURCE: https://www.clivemaund.com/article.php?id=5269