Forecasting silver prices is not an easy feat, as the white metal doesn’t act as many other markets.
Sometimes it’s better to “forget” the regular technical rules and approach silver market with an open mind.
One of those silver rules is that you don’t rust silver’s breakouts. It’s known for its “fake-outs” and those tend to fool inexperienced silver traders.
Another rule would be not to follow the herd, and especially NOT to expect silver to soar NOW based on its fundamental situation. Yes, even if one wants to buy silver based on the shortage in this market, or based on silver manipulation claims, it’s not a good idea to think that because of this silver market will soar NOW.
The silver shortage/manipulation story has been out there for literally decades. Silver did move to $50 in 2011, but it then declined profoundly, and while gold has been rallying in the recent years, silver price was barely able to temporarily (!) erase half of its previous decline.
Back in 2021, many predicted that silver prices would soar “todamoon” while I warned that it’s likely to happen eventually, it was unlikely to happen at that time. A few years later, much higher gold prices, and stock prices, and silver is below its 2021 top.
The key to silver price’s forecast for February 2024 lies not only on its short-term chart, but also on its long-term chart. Silver is currently a bit (but close to) its rising, long-term support line based on the 2020 and 2022 lows.
Once silver price breaks below this line, it’s likely to fall really significantly, just like it fell after breaking below an analogous line in 2008.
This might happen as early as in February. It might not, but it’s most likely coming either way.
Now, on a short-term basis (as seen on the first silver chart), silver price broke above its rising resistance line, and it seems to be verifying this breakout. Isn’t that bullish?
It would be bullish for many markets, but silver is tricky. Again, you don’t trust silver’s breakouts. Of course, there are times, when breakouts are followed by rallies, but “fakeouts” happen so frequently that relying on breakouts to forecast rallies in silver is not a good idea.
Besides, silver just outperformed gold on an immediate-term basis!
This tends to happen right before bigger declines, which only confirms the current bearish case for silver.
The history tends to rhyme, especially on the markets. After all, the two underlying forces that govern price moves: fear and greed are not going away anytime soon. The fundamental and geopolitical circumstances may change, but the emotions that are the direct trigger of buy and sell decisions don’t change.
Consequently, the same price and volume moves are likely to trigger the same or similar responses from market participants and thus cause similar follow-up moves.
This can be clearly seen on the above SLV ETF chart, if you focus on the moments and price moves that I marked on the chart. The 1-9 count shows analogous price moves, and the areas marked with orange rectangles are similar as well.
Even the volume spikes happened at analogous times!
The implication for the current silver price forecast is that we’re likely to see an acceleration in the decline either in February or in the following months. So far, the consolidation took longer than it did in 2012 and 2013 (hey, the history rhymes and it doesn’t repeat itself to the letter), but the follow-up is likely to be very bearish, anyway.
How low can silver decline next week? It’s a tough call, but I wouldn’t rule out a move to $22 or below. If we see a breakdown below this level, it’s likely to then be followed by a verification (= a move back up) because that would imply a breakdown below the above-mentioned rising, long-term support line.
Can it happen as early as next week? It can, but even if it doesn’t, I still think that it’s in the cards for February in general.
In my opinion, the biggest trading opportunity is in the junior mining stocks, but I think that silver will decline significantly as well.
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Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief