To The Moon

In recent months, while gold has been trading sideways, silver has been quietly climbing. Although it’s still some distance away from its all-time high, silver’s inherent volatility means it can’t be ruled out that a new high might be within reach. Interestingly, previous surges in silver prices have often been followed by significant market events of various kinds—each time marking dramatic moves in global finance. The question now is whether this pattern will repeat.

Looking back at the monthly silver price chart, it’s clear that during the years 2008, 2011, and 2020, silver experienced sharp rises or rebounds, only to be followed by equally dramatic crashes. Chronologically, these peaks align with three major market shockwaves: the subprime crisis, the European debt crisis, and the Covid-19 pandemic. All three brought substantial corrections to risk assets.

Easy money—abundant liquidity or capital with nowhere to go—has been a key driver behind these surges in the past, a situation that bears some resemblance to the present. With Nvidia’s latest “great” performance (yet another record high), and Trump—whose campaign once loudly championed MAGA—returning to Wall Street’s old playbook of aggressive price rallies, it’s as if the noise over tariffs has been forgotten. The main issue now is how long momentum for these high-level rallies can be sustained. After all, commodity inflation and stagflation, triggered by rising product prices and new tariffs, are foreseeable mid-term risks.

At the same time, there has been a steady stream of major companies announcing layoffs. On one side, the real economy is cutting costs, while on the other, financial markets remain red-hot. The imbalance between these two is becoming increasingly apparent. If Trump’s first term is anything to go by, things could spiral out of control this time as well, possibly cementing his legacy as one of the worst presidents in U.S. history.

Comparing different markets, U.S. equity indices tend to move ahead of silver. Thus, if a major drop in silver were to occur, it would likely follow a period when risk assets in general had already peaked or were losing steam. As discussed in last week’s livestream, after hitting new highs, the risk of an imminent, sharp correction or reversal in U.S. equities remains limited—unless the U.S. itself encounters a major “black swan” event. Currently, transmission of inflation pressures through the real economy will take some time to fully play out. The only scenario that could accelerate uncertainty would be if the market gets out of control and skyrockets in the short term.

With U.S. equities in a slow-bull environment, the major trend for silver is still to buy on pullbacks. The previous breakout zone around 35.5/35 has now become a support level, with a closer support line near 37. The former appears safer, but whether it will get tested is unclear. Meanwhile, the gold-silver ratio has returned to its previous breakout point, suggesting that the strength between gold and silver may soon rebalance—either gold rallies with silver, or silver consolidates alongside gold. A conservative strategy would be to go long near 35.5 and hedge with a gold-long/silver-short combination. Conversely, a major reversal and aggressive short positions will require patience; such opportunities are unlikely to present themselves in the near term.

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