Inflation Update: Silver and Precious Metals On Watch

slv silver etf trading rally higher rising prices chart inflation

Not the first time I have given readers this list of leading indicators to watch for a potential rise in inflation:

  1. Silver, especially if it can begin to outperform gold
  2. Oil, if spikes over $80 a barrel
  3. Sugar, if even with increased production begins to move up back over 23 cents a pound
  4. The dollar if fails 103 and selling pressure returns. 

Earlier in the week, we focused on sugar.

For the weekend, let’s focus on silver.

The dollar, also on the list, trades under 103 yet into support at 102.50 area. Let’s assume for now, the dollar will have issues getting back and staying over 103.

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That is bullish for metals.

As far as silver itself, why it is so important to watch is that with gold rallying, silver is also catching bids.

However, it is when silver outperforms gold that we start seeing 1979 all over again and a rise in inflation-this has not happened yet.

With Friday’s jobs report and on the heels of Powell’s speeches this past week, the consensus is that rates could drop come June-a catalyst for inflation? 


Silver though, is a bit more complex.

There is, like all commodities, a supply and demand component.

The supply side is mainly influenced by mining output and whether it can keep up with demand (used in solar panels, cars, manufacturing).

Then there is scrap silver, a huge component of recycling.

On the demand side though, here is where price pays.

Besides during periods of economic growth, during inflationary times, silver demand can not only remain stable, but it can also grow as an investment demand.

That is precisely why we are watching.

silver futures prices trading higher rising rally chart

I include 2 charts.

One is the ETF SLV, and the other is cash futures.

The SLV chart shows silver clearing the January 6-month calendar range. Bullish.

The Real Motion Indicator shows rising momentum and a new yearly high, as does price.

However, on the Leadership indicator, using GLD as the benchmark, silver continues to underperform.

On the futures chart, while momentum improves there, it has yet to meet last Decembers peak of momentum-that could mean we have not seen anything yet on price.

So, to get excited from here, silver futures needs to clear back over $25.00 an ounce.

Nevertheless, silver (and gold) should have your attention.

Twitter: @marketminute

The author may have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author and do not represent the views or opinions of any other person or entity.