There Is A Reason Why Silver Stackers Are Now Entering A Manic Market Time (What To Watch To Know)

We are in an emotional moment in the precious metals market. Last week I got an email from someone sharing a video of a silver guru predicting that the price of silver is going to go to $500 an ounce in a months. It was an up day for the metals markets so the Youtube algorithm pushed this out.. The next day silver had a down day and I got an email from someone else asking me if it was going to crash, with a reason to worry.

Here is the question they asked:

“What is your view on SLV a lomger term? I know you (and me also) gotten in it much earlier, but where are we going from here?”

“The current pricing looks a lot like 2011, and the SLV stayed down for years. GLD is a little less concerning to me.”

“It is funny because silver has much more industrial demand than gold, yet SLV at this price appears risky to me moving forward. Is it time to take a profit?”

“Also, what is your view on the Gold/Silver ratio in light of recent SLV corrections?”

The silver price action is generally more volatile than gold, because it is a smaller market, easier to move around, and with the smaller price per ounce attracts more speculators. I don’t think the gold/silver ratio means much, at least I don’t see anyway that it is predictive.

Here is what silver did in 2011.

Silver broke out in February 2011 and rallied for two months. During most of that rally the mining stocks, as you can see from the GDX plot I have below the silver chart, did not rally with silver. The GDX/GLD ratio actually failed to make a new high in April when silver made a new high by a wide margin.

(BTW - That’s something Bitcoin did against the whole stock market last year too, with the Bitcoin/SPX ratio I pointed this out over and over again and challenged Bitcoin gurus to show why this wouldn’t matter and not a single one did, just as not a single one now has refuted my demonstration that math shows that there no correlation between Bitcoin price movements and that of the US dollar index - which means Bitcoin IS NOT MONEY OR A CURRENCY.)

Back in 2011, though, this was a massive negative divergence, between the mining stocks and silver, and a warning sign that was going on for over three months. And if you can remember my friends Jordan Roy-Byrne and David Skarica were both pointing this out and warning people of a top.

That is not happening now.

The GDX/GLD ratio appears to have stabilized - it is certainly not trending down like it did in 2011.

As I wrote with more detail on February 1, I think the most likely scenario is that gold, silver, and the mining stocks end up going sideways in a consolidation trading range that will last for months, and could even go on all year. During such periods you are going to see some big up and down days and rallies and drops that in the end don’t really go anywhere. However, they will create emotional swings in people following the metals markets. There will be gurus that make bold predictions on up days who will get attention and then crash callers on temporary dips that do too - creating a manic state in those following the day to day action, especially those trying to trade it.

I’d also look back at the 2011 chart again.

Notice it took several months, after the first drop from the peak, for silver and the mining stocks to roll over again and go into what became huge bear markets. During those months the GDX/GLD ratio continued to go down. So, if you want to watch for green flags on the trend and red warning flags watch this ratio going forward.

I’m actually going to follow the action less for now and even take a break from putting out as much frequent content, as I don’t think much is going to happen of importance. So, don’t be surprised if there are days you don’t see me send out an email in the coming weeks and months.

Sideways markets are markets that often lead people to churn their money over, but they happen most of the time.

We have seen silver go into sideways consolidation periods multiple times in the past few years.

Yeah, the metals went up in in a powerful uptrend last year, and did well in 2024, but they spent almost two years going sideways before that. I like markets that line up like gold and silver did in 2023 and 2024, but no one cares at those times. It’s agriculture commodities that are lined up like that now.

Maybe it is time for you to take some profits - I have no idea and am not your investment advisor. Such decisions have to be made in context of what else one owns, how big the position is, and whether they are trying to do shorter term trading or long-term investing.

I use a rebalancing philosophy to manage my money, instead of trying to jump totally in and out of markets.

-Mike