
From a technical perspective, the price action in silver has been downright ugly. After trading at a high of $30.16 per ounce on the nearby COMEX futures contract on February 1, the price corrected to a low of this year at $23.965 during the final week of March. Silver recovered to $28.68 in May when it ran out of upside steam.
While many commodities have made new multi-year or all-time highs since silver probed above the $30 level and failed in early February, silver has not participated in the sector-wide rally.
At the end of Q2, silver was down 6.52% from its closing price at the end of 2020. Silver settled at the $26.194 level on June 30. On July 27, the price fell to a low of $24.515, adding to the losses in 2021. Two days later, on July 29, it was back near the $26 level. I last wrote about silver on Barchart on June 21, when the price was just over $26 per ounce. I summed up the piece by writing, “I continue to believe the market will resolve to the upside, but that does not mean we will not see lower price levels first.” Silver dropped but it failed to test the 2021 low at the $23.965 level. I am still bullish on silver and view the selloffs as buying opportunities for the long-term, even if trend following portfolios areshort. Silver’s technical position may be bearish, but if the action in 2020 is a guide, silver could be preparing to spoof the market once again.
The price action in silver has been weak compared to gold
Gold and silver are like peas and carrots in the precious metals sector. Throughout history, both metals have played roles in the financial system as means of exchange. While central banks continue to hold gold as an integral part of foreign exchange holdings, they no longer hold silver as the price has been volatile. The potential for manipulation is far higher than in the gold market. Meanwhile, both metals are hard assets, with gold playing the role of banknotes and silver as the change in our pockets. Digital currencies may be challenging fiat currencies, but gold and silver have one critical element in common with the cryptos; increasing the supply can only be accomplished by mining the metals. Governments and central banks can print and mint fiat currency to their heart’s content.
Meanwhile, gold and silver have not been setting the world on fire in 2021. Both metals fell to their lows for 2021 in March.

As the chart highlights, gold reached its bottom for 2021 at $1673.70 on March 8. At $1828.90 per ounce on July 29, gold was 9.27% above the low. Silver tends to be far more volatile than gold because it attracts periodic speculative interest.

The silver chart highlights at $25.815 per ounce; September silver was 7.72% above its March $23.965 low for this year on July 29. Silver has underperformed its precious cousin over the past weeks and months.
Silver above its critical technical support level
From a long-term perspective, critical technical support in the silver market sits at its breakout level. When a market breaks higher, the previous resistance level becomes the new support.

The chart dating back to 2001 shows silver broke out above technical resistance at the July 2016 $21.095 high in July 2020. The price has not returned to test that level, which is now its crucial support. While silver is trending towards a test of the 2021 low, it remains well above the support area from a technical perspective.
In 2020, silver had a false breakdown- An eleven-year low led to a seven-year high
Last year, silver traded in the broadest range in years.

The ten-year chart shows that silver traded from $11.735 to $29.53 in 2020, a $17.795 band. So far, in 2021, the range has been from $23.965 to $30.16 or $6.195. This year has been a sleepy period for the silver market. While the short-term price action is bearish, the longer-term picture reflects price consolidation at a higher level, which is a more positive factor for the metal. Price consolidation can be healthy as it shakes out the market’s speculative froth. In 2020, a spike lower that caused longs to scramble for an exit set the stage for the substantial rally. Last year, silver fell to an eleven-year low before rising to a seven-year high only five short months later.
Silver loves to spoof the market
The price action in silver tends to spoof longs and short from their risk positions. Spoofing is nothing new to the silver market. Last month, two Deutsche Bank traders received prison sentences of one year and one day for spoofing in the precious metals market. This week, two Merrill Lynch traders are on trial in Chicago, facing federal felony charges of spoofing and manipulation stemming from actions in the silver and precious metals futures markets. A jury will decide their fate, but if the recent convictions are a guide, they may be wearing orange jumpsuits after the trial. Three traders from JP Morgan are preparing for their day in court over the coming months.
Silver has always been a manipulated market. Regulators alleged that Nelson and Bunker Hunt attempted to corner the silver market in the later 1970s and 1980. Many other instances of price manipulation pepper silver’s history. Silver can be a highly volatile commodity when the price decides to move. Sometimes, as we witnessed during the March 2020 price spike lower, it can spoof the market buy falling or rising to levels that create significant bottoms or tops. As the price dropped to the lowest level since 2009 last year, silver looked awful, but it was the perfect time to load up on the metal as it more than doubled four months later.
Three reasons to love the prospects for higher silver prices
I trade with trends, which means I currently have a short bias in the silver futures market. However, as I profit from the falling price, I plow the profits into physical silver as at least three factors point to higher prices over the coming months and years:
- The long-term trend remains higher since silver hit rock bottom at the $3.50 level in 1993. The low for this century was just above the $4 level, and over the past decade, silver has not ventured below $11.70 per ounce.
- Silver has a long history as an inflation barometer. The tidal wave of central bank liquidity, low interest rates, and the tsunami of government stimulus are inflationary seeds that have begun to bloom. The CPI data over the past three months have validated rising inflationary pressures. In June, core CPI, excluding food and energy, rose 4.5%, the highest level in three decades. Even if the Federal Reserve tightens credit over the coming months and years, there is no sign that government spending will slow. As the value of money continues to erode, silver is a metal that should continue to be a store of value.
Silver’s physical demand is rising. Industrial demand from electronics and solar panels requires more silver production.

As the chart shows, The Silver Institute forecasts that silver demand of over one billion ounces in 2021 is at the highest level since 2015.
Silver’s short-term technicals look awful. However, the commodity that loves to spoof the market always has the potential to send false signals. Expect the unexpected in the silver market, and you will not be disappointed.