The Silver price has struggled to clear $30.00 in 2021. That could be about to change as XAGUSD may finally be ready to ride the commodity supercycle.
A perfect storm may be heading for Silver. A confluence of bullish developments could trigger the next bull run.
- Fed Balance Sheet Expansion. The Federal Reserve is on track to increase its balance sheet to $9 trillion over the next 18 months. This is evident in the growing amount of available money in the system (M1 money supply.)
- Increasing demand. The use of Silver in flexible electronics alone is set to increase by 48 million ounces over the next 8 years. Solar and Automotive industries will also require an increasing amount of Silver over the coming years.
- Multi-year chart breakout. The monthly chart is building for a breakout above $30.00 for the first time since 2013.
The Silver price seems set to benefit, not only from its status as an inflation hedge, but also its industrial utility.
2007/8 vs. 2020/21
There are similarities between 2007/8 and 2020/21.
The Great Financial Crisis (GFE) was triggered by over-leverage in the mortgage-backed securities market and clearly different from the current situation.
However, the tools employed to recharge the economy are the same: Lowering interest rates, huge monetary and fiscal stimulus, and infrastructure spending packages.
Only this time around, Central banks have turned the money printers to 11.
It is estimated that thirty-five percent of all dollars in existence were printed in a 10-month period during 2020.
If we look at the long-term Silver price chart, we can see that it took some time before this filtered through to the price. In fact, Silver prices didn’t break higher until 2010.
When the price eventually broke through the resistance at $20.00, it embarked on a 6-month rally, adding +60% to the price.
Silver eventually topped out at just under $50.00 per ounce.
Of course, there is no guarantee that it will repeat that feat this time around. However, the current backdrop appears to be much more supportive of the Silver price.
The current Silver price is $27.935. As yet, the $30.00 resistance level is still capping the price. Therefore, the best course of action is to monitor the price action over the next week.
As this is a long-term prediction, my preference would be to wait for a confirmed breakout on the weekly time frame. This may not necessarily happen this week or even this month, but the chances of it happening at some stage are improving all the time.
Silver Price 1-Month Chart
XAGUSD vs. M1 Money Supply
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