Behind us is a very successful period for the silver market, which with great dynamics broke out of the range of several-year volatility, which is a phase of long-term accumulation. Accumulation ended with a covid trap, i.e. dropping the market on new lows, but also an immediate return of the market to the range of previous volatility. Precious metals have been helped by the central bank’s money-printing policies for a long time, but also by maintaining real, negative interest rates. In a situation where it is impossible to protect the purchasing power of money in bonds or bank deposits, and the stocks of developed markets or real estate are already after many years of very strong growth, money began to be directed to the commodities and precious metals markets. These do not pay dividends, but they are historically very cheap in relation to the stock markets (not to mention debt), thanks to which the lack of dividends is compensated by the prospect of an increase in the price itself.
As can be seen in the chart above, the dynamics of silver prices has recently been very high, and the market, after a 3-week rally, reached the area of 2600 ¢ / ozt in one move, currently breaching this level. Although in the long term the silver market, especially with the still historically high Gold-Silver Ratio, has great prospects (the policy of central banks has to be continued), in the short term, there is some space to correct the overheated sentiment and it is worth bearing in mind such a risk when considering jumping on this train at current prices. Technically, after such a jump, the market would have the right to move back towards 1900-2000 ¢ / ozt, an area where the recent break triggered a dynamic acceleration. A return to this zone would mean, by the way, apart from adding the missing pullback, that the first correction of the new trend would be equal to the height of the last impulse of the previous downtrend (red rectangles).
Tomasz Gessner
