Silver Price Soars… Only to Fail Once Again

What a boring market silver used to be for the last couple of weeks… Not anymore.

Silver just jumped above $26, only to fail miserably.

Let’s see what the silver price just did and what gold did at the same time.

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Both jumped higher, but the size of the move in silver was MUCH greater than the one seen in gold. It’s even more visible when we compare both price moves with their more distant history.

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What happened in gold was more or less within the ‘recent normal’. Just another failed (!) attempt to move above $2,000.

In the case of the price of silver, however, it was much more than just that.

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The white metal just jumped to its yearly high! How extraordinary! Or… is it? If the precious metals sector was indeed about to decline – just like I’m expecting it to – this kind of behavior is normal and natural.

What is chaos to the fly, is the order to the spider.

The more one knows how the precious metals market tends to behave at specific times of its cyclical nature, the less surprised they are by what puzzles and perplexes others.

This means exactly what you think it means – at least if you’ve been following my analyses for some time.

Silver tends to outperform gold on a very short-term basis right before bigger declines. And since yesterday’s “show” was truly profound, it’s quite likely that the decline will be profound as well.

Interestingly, junior miners declined yesterday.

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So, we have the perfect confirmation on the relative front of what’s likely to happen next. Miners tend to underperform gold before bigger declines, while silver tends to outperform it (especially on a very short-term basis). We just saw both.

The Fed’s interest rate decision is tomorrow, and the issue of debt ceiling got popular, so there might be some intraday volatility this week. Still, I expect the really big “surprises” to be to the downside. The market practically just told us that.

Also, please note that stocks formed a near-perfect gravestone doji reversal candlestick.

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The intraday high was slightly below the 2023 high, so the head and shoulders formation where late-2022 and the current tops are the shoulders and the 2023 is the head, remains in place – at least potentially.

And as stocks declined, so did the FCX, which means that our short position in this stock became a bit more profitable.

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Please note how far FCX is from its 2023 high – how severely it underperforms the S&P 500 index. This is likely to persist for weeks or even months, in my view, so as stocks decline, FCX is likely to decline even more, thus likely contributing to our profits even more.

And the precious metals sector is likely to join in this decline, too. In particular, in my view, the downside potential for junior mining stocks is enormous at this time.

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Przemyslaw Radomski, CFA
Founder, Editor-in-chief