-Ted Butler, Senior Analyst
The silver price plunged 7% to $48 on Tuesday this week, marking the first real hiccup in a relentless rally that culminated with a nominal all-time high above $54 last Friday.
Since that healthy correction, the white metal has reacquainted itself with $49 and now appears to be entering a period of high-level consolidation before the next leg-up.
In the meantime, it’s possible that silver’s volatility exposes investors to some short-term downside, with a moderate Fibonacci retracement toward $43 not entirely out of the question.
However, with the gold-silver ratio still historically high, and with many of the catalysts behind silver’s surge beyond $50 still in play, most investors remain squarely focused on silver’s upside.
With this in mind, today’s article will aim to answer the question: How High Can Silver Fly?
https://www.kitco.com/charts/silver
To understand the degree to which silver could outperform, we first need to ascertain the extent to which it’s undervalued, overvalued or fairly valued relative to historical bull cycles.
Fiat currencies are an extremely poor measuring stick for this task due to their inability to hold purchasing power, so gold remains the optimal lens to apply when valuing the silver
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China’s dominance of the solar manufacturing industry runs to the tune of +80%, so it’s not surprising that country dominates silver headlines.
But investors need to take stock of India’s growing influence on silver markets. Long known as precious metals afficionados, Indians have been storing their wealth in gold and silver for a very long time.
Indians buy gold and silver as a method of savings, especially because it can always be sold for cash if needed, and because they have little trust in their currency which has gone through endless, dramatic cycles of debasement.
Indians are big gold buyers, and they buy with excess cash following their harvest season. Hindus will often wait to make larger gold purchases for their fall festivals of Dhanteras and Diwali.
India and East Asia together represent about 65% of global silver jewelry demand. Silverware represents about 6% of silver demand, with most of that coming from India.
Although India’s affinity for silver has mostly been for physical coins and bars, silverware and silver jewelry, the nation of 1.45 billion people is enjoying a strong and growing economy. As the country continues to modernize, they are turning to renewable energy along the way,
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That Should Mean a Bullish Setup for The Metal
As we approach a likely rate cut in September, get ready for volatility, and a bullish setup for silver.
That’s why, for my paid Silver Stock Investor subscribers, I’m taking advantage and adding a silver explorer advancing one of the world’s richest primary silver deposits, with already superb results from this season’s drilling.
A recent Producer Price Index reading showed a year-over-year reading of 2.2%, well below the previous month’s 2.7%. But if you look under the hood, the reading was lower thanks to the trade category which measures profit margins. When stripped out, the PPI was actually up 0.3%.
So, inflation may not fall much at all, yet the Fed’s about to cut. Go figure.
Sounds like the perfect environment for silver…
Meanwhile, bond traders are pricing in higher default risks. That’s concerning. The cost to insure against bond defaults – these are called credit default swaps (CDS) – recently jumped to a six-month high.
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In my last issue, I said one reason to remain cautious on silver and gold was the
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