Long-Term Outlook for Silver Shows New Trend Highs

Since the 2022 bottom in silver (XAG/USD), it has outperformed gold (XAU/USD) by about 9%. The chart below illustrates the approximate performance of each asset since then. Silver shows gains over 75% during the period, while gold was up 66%. But when looking at the progression of the bull trend for each asset, silver has been lagging. Gold recently broke out to new all-time highs, while silver has not yet reached a new trend high. Silver reached a record high $49.78 in April 2011. So, relative to the price structure of the trend of higher swing highs and higher swing lows, silver has not reached a new higher swing high. That would happen on a move above $34.85. This suggests that if the outperformance of silver relative to gold seen the past few years is retained, a breakout to new trend highs in silver looks likely. And bullish momentum toward that end began only last week.

Silver and Gold Performance Comparison

Bullish Continuation Recently Started

Silver broke out of a long-term resistance level at $29.83 in May 2024. That eventually led to a trend high at $34.85, reached in October of last year. Subsequently, following a bearish retracement, in mid-January a bull breakout above a small downtrend line that marked dynamic resistance for the retracement, triggered. An initial bull trend continuation signal was generated and followed by a sharp advance into this week’s high of $32.54, at the time of this writing. Notice that the market seemed to recognize the 61.8% Fibonacci retracement of the long-term downtrend, as resistance was seen a little below that price level.  In addition to the trendline breakout, the long-term monthly chart confirmed strength this week as the January high at $31.72 was exceeded to the upside. Once there is a weekly close above that high, another piece of bullish evidence will be generated. 

Weekly Chart – XAU/USD

Weekly Chart – XAU/USD

An initial higher target, above the $34.85 trend high, is shown on the chart around a confluence zone from $36.15 to $36.95. That price zone consists of the completion of a measured move (green arrow) and a 127.2% extension of the bearish retracement from the $34.85 peak. The monthly chart below illustrates the analysis. A sharp rally of $18.61 or 166% began from the 2020 low at $11.22. If the subsequent advance that started from the 2022 retracement swing low at $17.54 matches the first, it will do so on a price basis at $36.15. On a percentage basis the second measured move (blue arrow) completes around $46.61. Once there is similarity in price swings, there is the potential for resistance to be seen. 

Regardless of the potential target, pay attention to the behavior of silver if it can get above and stay above the October 2012 interim swing high at $35.37. If the $36.15 target zone is reached, then the price of silver will have exceeded the October 2012 high. That would give another bullish sign, particularly if there is a weekly close above that swing high. 

Monthly Chart – XAG/USD

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