Why You Must Own Silver in 2018

By Jordan Roy-Byrne

Jordan Roy-Byrne is the editor and publisher of The Daily Gold and The Daily Gold Premium, where he provides expert commentary about the commodities markets, with an emphasis on gold and silver. We found his recent article about why you should own silver in 2018 particularly informative. Below, Jordan explains why he believes silver could soon test critical resistance levels—making it a vital asset to include in your portfolio. To read more articles like this from Jordan, you can subscribe to The Daily Gold here.

While gold is very close to a major breakout (in price), its strength has not filtered down to silver yet. Gold is 3% away from a major breakout and comfortably above its long-term moving averages. However, silver is well below its 2016 high and is currently battling its 200-day moving average. But that is okay. Silver typically lags and underperforms gold until gold gains momentum or breaks key resistance. A major breakout in gold this year and its effect on silver is just one reason why silver could have a big year.

If and when silver breaks above its 2017 highs, we can declare its bear market over (in terms of time). The chart below plots all of the major bear markets in silver. They all end at the point when silver begins to make higher highs and rises in an impulsive fashion. Silver’s bear market was the second worst by price and potentially the worst in terms of time.

The next chart shows the rebounds in silver from the endpoints in the previous chart. From the three endpoints, silver rebounded significantly in the next 12 to 15 months. We also included the 2008 crash from which silver rebounded 100% in the following 13 months.

Turning back to the present, we find $20 per ounce on a monthly closing basis to be the most significant resistance for silver. The chart below is a plot of monthly closing prices. It is quite clear that a monthly close above $20 per ounce (the 2016 high) could kickstart a good run for silver.

Moving from the very long-term to the present, we note that silver faces initial resistance at trendline 2 as well as at the 2017 highs near $18 per ounce. That is what stands between silver at present and the important $20 per ounce resistance (which is also shown at trendline 1).

Silver has often rebounded nearly 100% within 12 to 15 months after bad and long bear markets. History says silver is ripe for a similar move over the next 12 to 18 months. Since silver follows gold, a breakout in gold could be a huge catalyst for silver to test and break resistance at $20 per ounce. If that happens, silver would be on its way to another, typical substantial rebound. It has happened before, and we expect it will happen again.

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