Silver Is Your Inflation Protector

Once inflationary fears spread further, silver will...

by Korbinian Koller via Midas Touch Consulting

Silver is your inflation protector. Especially since investors have limited choices when seeking out wealth protection and profitable opportunities to compensate for this inflationary environment. Silver in this aspect is more volatile and also more sensitive to inflationary times, which shows in the divergence of its trading behavior towards gold over the last year.

Gold in US-Dollar, weekly Chart, Gold trending down:

Gold in US-Dollar, weekly chart as of October 8th, 2021.

At first, glance, looking at price percentage declines of the gold chart, one could assume silver to be the weaker of the two precious metals in the race to make it into your wealth preservation portfolio.

Silver in US-Dollar, weekly Chart, Silver trading sideways:

Silver in US-Dollar, weekly chart as of October 8th, 2021.

Once comparing the gold chart with the above silver chart, one can see that gold traded in a trending fashion lower since its October 2020 highs, while silver traded sideways. It can be speculated that once inflationary fears spread further, silver will outperform gold by a generous margin.

Gold/Silver-Ratio, Monthly Chart, a need to catch up:

Gold/Silver-Ratio, monthly chart as of October 8th, 2021.

In addition, once the upward direction for the larger time frames is reestablished after a likely crash scenario looming over the markets, silver also needs to catch up. We find a real relationship between the two shiny metals somewhere in the teens and not at excessive levels of 78 right now.

Silver in US-Dollar, Monthly Chart, timing is everything:

Silver in US-Dollar, monthly chart as of October 8th, 2021.

Now that we have found the preferred speculative vehicle, it is essential to point out that the physical acquisition is the most desirable exposure to this market. We are still in a corrective phase of the precious metal sector. Consequently, patience is key to time one's purchases. One advantage, the silver investor has is that silver typically follows gold with a slight delay from the larger long-term time frame perspective.

A look at the monthly chart above reveals silvers strength. After a stunning move up from March last year from US$ 11.64 to US$ 29.85, prices retraced modestly. Price in relationship to Ichimoku cloud analysis also suggests a bullish continuation. Most significantly, we can see that a volume price analysis over the last fifteen years shows a strong supply zone at US$ 19.80. Where bears get, a breath of air is at the slow stochastic readings near 80 (red line on bottom indicator).

Silver is your inflation protector:

It is timing that is elusive here. Crash scenarios fall out of the norm. This typically affects charts and clouds a neutral stand and interpretation towards the market. Here, silver shines in its typically lagging behavior regarding entries compared to its brother gold. Most often followed by its explosive follow-through and, as such, bang for the buck. As such, we are keeping a keen eye on the gold prices to lead us to find low-risk entry zones. Noteworthy is also the lower risk of regulative interference from the government of physical ownership in comparison to gold.

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This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision. The views, thoughts and opinions expressed here are the author's alone. They do not necessarily reflect or represent the views and opinions of Midas Touch Consulting.

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