Evidence of a sustained bullish phase for silver

Key points:

• Silver has exhibited impressive price momentum, rallying over 100% in two years
• Comparable multi-year gains suggest the precious metal can extend its upward trajectory
• The shiny metal has also registered a 4-year high on 21 occasions in the last year

Price action indicative of a secular uptrend

Silver's price momentum has been impressive, with the precious metal gaining over 100% in two years for only the sixth time since 1973. Historically, this level of performance has often coincided with secular uptrends in the precious metal. As illustrated in the chart below, readings above 100% have corresponded with annualized returns of 19.5%, notably higher than those observed at lower levels.  

Reinforcing the bull case, silver has registered a 4-year high on 21 separate occasions over the past year, a frequency that points to persistent underlying strength rather than a fleeting rally. Taken together, the surge in long-term momentum and the repeated breakout activity suggest that silver is exhibiting characteristics consistent with prior secular bull phases.

The bull case

Although the sample size is limited, history suggests that silver's advance over the last two years resembles secular uptrends in the 1970s or 2000s. Notably, the signal in 2022 occurred while the metal was below its 2020 peak, unlike the other prior precedents or today, which occurred at highs.

In 2006, silver peaked almost immediately and then suffered a 33% drawdown. At the time, it had a one and two-year gain of over 100% for each time frame. Today, having gained 38% over the past year, silver's current one- and two-year momentum stands in contrast to that period, signaling it hasn't accelerated excessively. 

The win streak continues

In the March webinar, a subscriber asked what typically happens after silver breaks to a four-year high. At the time, I shared a chart showing that silver had reached eight four-year highs over the past year and noted that surpassing this level historically tended to be bullish for the metal. Since then, silver has now achieved 21 four-year highs, reinforcing the positive outlook, as illustrated in the updated chart below.

While the sample size is limited, history suggests that silver's steady pattern of breakouts over the past year is supportive of the longer-term secular trend. The two notable exceptions-2006 and 2008-occurred under very different circumstances, particularly 2008 when the Global Financial Crisis was unfolding. 

Silver miners

The table below shows trend scores for holdings in the silver and junior silver miner ETFs, SIL and SILJ. Most companies display strong trend and relative strength readings, highlighting bullish conditions across the group. 

Compania De Minas Buenaventura (BVN) has broken out of a decade long base and looks poised to rally further should silver march higher.

What the research tells us...

Silver has gained over 100% in the past 24 months and registered a 4-year high on 21 occasions over the last year. Price momentum and repeated breakouts of this nature are often associated with secular uptrends, and the current advance fits that pattern. With prices now less than 10% below its all-time high, silver appears poised to challenge and potentially surpass that record level. In a secular uptrend in silver, miners should tag along, which is being confirmed in the current advance by excellent trend and relative strength conditions.