Our silver price forecast for 2019 is mildly bullish. However, there is one wildcard which may make our silver price forecast for 2019 wildly bullish. Continue reading, and learn how InvestingHaven’s research team looks at markets.
[Ed. note: This silver price forecast 2019 article was originally published on October 2nd, last year. Readers can verify this by checking the dates on the charts. Throughout 2019 we will continuously update this silver price forecast, every one or two months. The new updates will appear at the bottom of this silver price forecast. It allows our followers to track the evolution of the silver market as well as our silver price forecast. With every major update in 2019 we will also update the publish date. Last update of this silver price forecast: April 14th, 2019.]
Note that our silver price forecast for 2019 has a baseline prediction (midly bullish) as well as a bullish prediction.
We believe silver (SILVER) hit a major bottom on August 14th, 2018. That’s when there was bearish momentum, and many were forecasting that silver would fall below $10. Our leading indicators were screaming “major bottom” and so, as per our discipline to our method, we were confident that the drop of silver to $14 was the bottom of the year.
Note that we were very vocal on our prediction, as on the day of the bottom, when everyone was as negative as possibly imaginable, we came out in the public with our silver price crash article which included our ‘this is a major bottom’ forecast.
That said, what is 2019 going to bring?
Silver price forecast 2019: a lagging and a misleading indicator
In forecasting the price of silver there is one thing that must be foremost our mind: not making mistakes by looking at lagging indicators. We know of two misleading indicators.
First, the silver news. It is very easy to get caught up in chasing the news to understand where the price of silver, like the price of any other asset or market, is moving. The biggest illusion is reading news to forecast potential future price points.
Never, really never, will this work.
As a nice illustration let’s follow this chain of news events:
- Bloomberg reports how the mighty dollar and trade fears push down silver prices in September.
- One week later Bloomberg publishes this article on the highest silver to gold ratio in decades and a gold fund outflow vs. silver fund inflow.
- Marketwatch follows in October the downtrend in gold and silver.
- One week later Marketwatch favors silver above gold.
This leaves any investor with the question “so what” or “what now”? Way too hard to make something meaningful out of this, so investors need another ‘method’.
Second, reading inflation indicators to understand the future price of silver. Many make the mistake of following CPI-alike indexes for gold or silver forecasts. It doesn’t work, as precious metals do not only move on inflation changes. They are more ‘sophisticated’ so to speak, it is not a one-to-one correlation with inflation that makes them move.
Third, the correlation between silver and base metals is certainly a fair indicator. However, it is not the only one. So a silver price forecast of a 50% rally like this one solely based on the base metals price correlation will not work. Visibly, it did not work, as the silver price is far from the 50% rise they forecasted.
Silver price forecast 2019: leading indicators
The first leading indicator for our silver price forecast 2019 is the price of gold.
As said many times the price of gold is the leading indicator for the precious metals complex as it tries to turn its bear market into a bull market.
In 2001, when gold stopped its decline, it started its bull market, and only later did silver follow. Silver underperforms when gold starts a new bull market.
At major tops, however, silver tends to be the one to outperform, similar to April 2011, after which gold set its major peak 6 months later.
Gold, right now, is in the process of setting a giant cup-and-handle. This would be bullish for precious metals, and silver in particular, though silver may follow gold’s path with some delay.
[Ed. note on April 14th, 2019: The price of gold, major driver of silver’s price in this phase of the precious metals market, is attempting to turn bullish. It did not succeed as of yet. Our observation is that the conditions in the first 3 months of 2019 were not favorable enough to overcome the giant bear market wall. Remember, gold at $1350 to $1375 is by far THE most important price point to watch. It is where the precious metals market in its entirety becomes bullish once above it. That’s when a lot of energy will be unleashed. ]
[Ed. note on April 14th, 2019: Again, a 6 year resistance area in the context of an 8 year bear market is a big thing. Really favorable conditions are required to break through this. The conditions were just not as favorable as should be. We expect this to change in July / August of 2019. Read more details in our gold forecast, bottom part of the article updated on April 14th, 2019. ]
The second leading indicator for our silver price forecast 2019 is the Euro.
As per our gold price forecast for 2019 it is the Euro that brings lots of insights to our precious metals forecast(s). This is what we wrote about the Euro, and its predictive value for gold:
In recent years, the Euro has been leading the price of gold. Every time the Euro tested secular support or resistance, or broke out or down, it preceded an important top or bottom in the gold price.
For 2019 it seems that the Euro is moving in no man’s land, at least based on the current trend. The Euro has a track record of moving fast once it breaks out or down. Also, near secular support or resistance it tends to stay there for a while. Currently, though, we don’t see any of this.
As the Euro does not seem to be providing a negative direction to markets we interpret this is neutral to precious metals.
[Ed. note on April 14th, 2019: This is an updated and different version of the Euro long term chart. We added this on April 14th, 2019. It really shows that the Euro is not working ‘against’ the gold market. A rising Euro should have been better, but a mildly falling Euro is simply not supportive of gold (not more than that). We expect the decline in the Euro to end anytime soon, there is some 6 pct more downside but not much more according to us. Any move higher in the Euro towards the 1.22 area will spur another rally in gold’s price.]
The third leading indicator for our silver price forecast 2019 is the Commitment of Traders report.
The Commitment of Traders report, in short COT, shows the silver futures market positions of large traders.
The silver COT report shows how extreme the current situation in the silver market is.
How to read the silver COT chart? The extreme levels in the center pane are the ones to focus on. The closer positions are to the zero line, the deeper the bottom that will be set. This may vary if the silver market is in a bull market vs a bear market, but the point is that extreme positions cannot last for a long time.
Never before in recorded history of the silver futures market have we seen such extreme levels.
Extreme hedging, whatever it means, is what is happening, and that of course has to resolve and normalize, through higher prices.
[Ed. note on April 14th, 2019: This is an updated version of the silver COT chart. We added this on April 14th, 2019. It really shows the evolution of the silver COT report, specifically the positions of market participants as visualized in the center pane. After a steep rise in the first 2 months of 2019 the net positions of non-commercial traders are back to in single digit territory. This is an extreme position, and that’s where we know that the downside in the silver price becomes very limited! In gold we see a comparable situation though not as extreme as in silver. When it comes to gold we wrote this “we expect the decline in gold’s price to end soon, ultimately in the summer months of 2019.” Silver will follow a similar path.]
Silver price forecast 2019: the wildcard
There is one wildcard we will use for our silver price forecast for 2019: interest rates.
As explained in our piece Major Turning Point: End Of 40-Year Bull Market In Bonds there will be seismic shifts in markets in 2019 and beyond once 10-year Treasury Yields confirm their breakout above 3.10.
This quote is one of the most important ones you will read in 2019!
A massive level of capital, never seen before, in the order of $40 trillion, will start moving around. Obviously, not all of it, but a considerable part will move elsewhere. Can anyone imagine what will happen if this becomes a trend into the same direction. Correct: stampede.
One of the potential scenarios is that the massive outflow out of the bond market will push capital to stocks and commodities. Consequently, capital will flow out of the US Dollar. In such a scenario we expect a sudden hit of inflation.
If, and that’s a big IF, that were to happen, we see a sudden rise in commodities and inflation indicators. This will push the price of silver much higher in 2019.
The probability of this top happening is 20% according to us.
Silver miners to gold price ratio
The gold price is the leading indicator for precious metals. In other words it is the first one to lead precious metals out of their bear market. That’s why it is worth following the silver miners to gold price ratio.
The silver miners to gold price ratio can tell us whether silver miners outperform the price of gold. In other words if silver miners rise faster than the gold price. This may feel somehow similar to the gold to silver price ratio, but it’s one on steroids.
We believe it is worth checking this ratio not as a leading indicator but a secondary indicator. That’s primarily to understand if the gold price rise or fall has exponential effects on the silver market. Silver miners tend to move sharper in both directions, so it’s a clearer indicator than the gold to silver ratio.
This ratio tested a crucial level in Sept 2018 a crucial level. As long as this holds we believe it will be great news for silver and silver miners.
This secondary indicator suggests it is great news if 0.019 holds. This would be outstanding once the ratio rises above 0.024.
Silver price forecast 2019: the weekly chart
The weekly silver price chart has one important message: the double bottom against December 2015.
If this double bottom holds, which we forecast based on the leading indicators mentioned above, we conclude this will have a bullish effect on our silver price forecast for 2019.
However, the weekly silver chart is not sufficient. We have to zoom in to the monthly silver chart in order to understand dominant trends.
Silver price forecast 2019: the monthly chart
Silver’s monthly chart has some crucial insights, in particular 4 of them, each one indicated with a figure on the chart.
- Trendline (1) suggests the long term uptrend is not broken yet.
- Support (2) says there is major support at $13.50 which implies this price level will likely hold but also means it will have major bearish implications if it breaks.
- Band (3) in which silver moved 2y ago is a less bearish band. Silver makes it into chart area (4) once silver rises above $16.00.
- We believe silver will rise to area (4) in 2019, and, depending on the USD reaction on the end of the 40-year bull market in bonds, inflation may hit in 2019 and 2020, pushing silver about formidable resistance at $21.50.
So what is our final call on our silver price forecast for 2019?
Our baseline forecast is $17 to $21.50. We prefer to work with a range, not a specific price point. That’s area (4) on the chart below.
However, if the bond market outflow, as explained above, results in an inflow of capital in commodities and stocks, resulting in a sudden rise in inflation and ‘risk on’, we will see a strong breakout in silver above $21.50. In that scenario we forecast $26 for silver in 2019. The probability is just 20% though.
Update on November 4th: Inflation as another catalyst for higher silver prices in 2019?
This section was added on November 4th 2018.
Prices for a lot of things in everyday life are going up. Especially CEOs are flashing a warning about this as explained in this recent video.
There is more evidence of consumer price inflation. In the consumer space many product prices have increased in the recent 12 months. A McDonalds Big Mac went up 4.7% against a year ago, Starbucks rose their price of a freshly brewed coffee by 8.9%, one of the popular Domino’s pizza went up 5.9%.
When we check the chart of StockCharts’ inflationary indicator, and overlay it by the precious metals indicator (gold price), we find a relatively strong positive correlation on the high level direction of both. Primarily secular double bottoms and double tops seem to be a reliable indicator and ‘catalyst’ for precious metals prices, in both directions. After inflation’s giant double bottom of 1999/2001 and giant double top of 2008/2010, it might be setting up for a giant double bottom in 2016/2018!
The chart indicates the major double bottom in 1999/2001 (with a higher low) and the major double top in 2008/2010 (with a major lower high). In a somehow similar fashion the 2016 major bottom may be a higher low against the 2018 bottom.
This inflation data point provided more evidence of higher precious metals prices in 2019 though more as a secondary indicator.
Update on January 3d, 2019: Silver breaks out, silver stocks strong, silver forecast 2019 materializing
The daily silver price chart shows the breakout of the silver price in the first days of 2019. After a consolidation of 5 months silver’s chart now shows a rounding bottom. The breakout is beautifully shown on the daily chart, and the weekly silver chart shows not only the current breakout but also two more things:
- It shows a giant double bottom, which, as well, is bullish in nature! Moreover, it confirms a bullish start of 2019.
- We see a higher low, especially against the December 2015 low. A higher low is a bullish long term signal.
What we can derive from this weekly silver chart is a price target for 2019. We see a congestion in 2017 and 2018 in the 16.5 to 18.0 area. That’s our first price target.
Our most bullish case is the top of the previous decline. It would be in the 20 to 21 area. This is really feasible for silver to get there.
Update on February 17th, 2019: Silver breakout continues, silver stocks outperforming, silver forecast 2019 almost confirmed
We see major breakouts taking place in the precious metals space. One of the ratios we see breaking out is the silver miners to S&P 500 ratio which we feature below. They are all about to confirm that our silver price forecast 2019 is about to get confirmed!
Let’s first start with the silver price though.
The weekly silver price chart looks gorgeous, literally! The 2 year downtrend is now giving way to an upside breakout. Needless to say, just this one fact is the confirmation for our silver price forecast.
The double bottom 2016 against 2018 was confirmed. And now a break of the downtrend is about to get confirmed as well.
The monthly chart does not show right away a new insight compared to the weekly chart above.
However, the devil is in the details. A very sharp eagle’s eye does notice something that nobody else sees.
We did annotate with green dotted lines what may be taking place as the start of a future rising channel. This is the beauty of chart analysis. It is about forecasting future prices or trends based on current data points. Ideally, this happens in a way that nobody else is able to see.
The lowest resistance point of this future channel is between $20 and $21. No coincidence this is also our baseline price target as our 2019 silver forecast. The most bullish target is $28. No coincidence as we did pick this price target more than 6 months ago at peak pessimism!
Surprisingly, at the same time interestingly, there is no news whatsoever on this major event in the silver market. It is beyond us. We watch this major news aggregator in their silver news section and hardly any news to see which comes close to our news update! Furthermore, Google’s news aggregation service does even show that not any of the major news outlets like Bloomberg or Marketwatch or Forbes are writing about the silver price.
Just to be clear, at InvestingHaven, we literally love silent bull markets for the reasons outlined in our 10 Tips To Master Investing Without Emotions.
The silver miners to the S&P 500 is a ratio that we follow closely, and is revealing a giant breakout already!
The way to interpret this ratio is ‘relative strength’. If and when silver miners rise faster than broad markets this ratio goes up.
This ratio broke out a few months ago. However, just a little bit of work is needed to confirm this breakout. A small push higher in silver miners is needed.
We especially like the double bottom against Jan 2016 on this chart. This is very powerful (read: bullish) when combined with our gold and silver price forecasts as well as gold and silver miner trends.
** Update on April 14th, 2019 **
Silver close to a major bottom, yet again. Silver price forecast still valid.
We added several notes in the form of an editorial comment throughout the text above. Particularly, the ‘leading indicators’ section has updates on the leading indicators gold, Euro and silver futures market. We recommend readers check these comments along with the up-to-date charts we added on April 14th, 2019.
The conclusion is that silver is near a major bottom. The downside is really limited!
The precious metals market, in particular the silver market, now waits for gold to turn bullish again.
We find more evidence of our viewpoint and conclusion outlined above on silver’s monthly chart. Silver is now moving close to its apex within this giant triangle pattern. It is hardly possible to get closer into the apex. A resolution is around the corner. Given the leading indicators outlined above the odds favor a bullish breakout of the apex.
Interestingly, we find even more evidence of a major silver bottom. The silver to gold price ratio is the one we add into our silver forecast story.
Below is the monthly silver to gold price ratio over 50 years.
This ratio hits rock solid bottoms, historically. Undervaluation of silver against gold is what we read into this.
However, this does not suggest anything about timing whatsoever. Undervaluation can go on for much longer than anyone hopes for. Still, considered together with all other leading indicators mentioned above, we sense that silver can only rise as from current levels.
Note that ratios are of secondary importance. They are no leading indicators. So they must be considered as a secondary source of evidence.
Watch for our exit plan update once our silver forecast 2019 is achieved
Our silver forecast 2019 is well underway. The key question is whether and when to take profits off the table. Depending on how our leading silver indicators and gold indicators evolve throughout 2019 we will inform our followers. Especially we will publish an alert if and when news insights about an exit plan become clear. Follow us for updates on when and how to exit the silver market in 2019 and beyond.
[Ed. note: As of this week we will provide in-depth analysis to our ‘free newsletter’ subscribers. We will bring premium content with specific (gold and silver) investing tips on a weekly basis, mid-week, free of charge. We will do this for 4 to 6 months. Subscribe to our free newsletter and get premium (gold and silver) investing insights in 2019 for free. Sign up >> ]
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