A Silver Price Forecast For 2020 And 2021

We see a mildly bullish 2020 with a silver prediction of $22, but a wildly bullish 2021 with a prediction of $28

Article From investinghaven.com

October 20, 2019


 

We consider our annual silver price forecast one of those important forecasts because of our track record in forecasting silver prices. According to our latest silver forecast we predict a new bull market. However, this is not a raging bull market, it is in an early stage in 2020 and might start picking up in 2021. Silver’s price has an upside potential of 30% ($22/oz) in 2020, and an upside potential of 65% ($28/oz) in 2021. That’s against prices at the time of writing around $17.50. The prerequisite is that silver’s COT report shows signs of a bull market, and that Pring’s inflation indicator picks up again. Our 2020 forecast for silver is mildly bullish while our 2021 forecast is wildly bullish with a big spike. We consider this silver price forecast to be one of the must read forecasts of InvestingHaven’s research.

As a first general thing we have to point out a very common misconception. Investors tend to think that silver is bullish most of the time. Nothing is further from the truth.

The important misconception is that silver is exceptionally bullish. Most of the time it is bearish or neutral. However, those few times that it turns bullish it does so on steroids. “Once bullish, extremely bullish,” is what characterizes silver.

This is another illustration of Tsaklanos his 1/99 Investing Principles: it is only 1% of the time that silver is wildly bullish. The remaining 99% of the time silver is flat to bearish.

Why This Silver Price Prediction?

What we are really (only) interested in is to catch these major moves in silver. That’s the reason we we will continuously update this silver forecast throughout 2020 and 2021.

As said before we are on the lookout of markets that become a multi bagger in 6 to 9 months’ time. We committed before on this: Forecasting The 3 Top Opportunities Per Year Becomes InvestingHaven’s Mission. That’s the reason why we do this research, and why we publish this silver price prediction.

Based on the elements in this article we conclude that the likelihood of silver setting some spikes in 2020 and 2021 is high. Timing will be crucial, and precision will be of the highest importance!

We strongly recommend readers to check in often and follow all our articles and forecasts.

Our Silver Price Forecast for 2020 and 2021

Let’s start with the conclusions of our silver price forecast for 2020 and 2021. Readers who don’t want to understand our underlying forecasting method can ignore the rest of the article.

Silver is a new bull market, period.

Based on the long-term charts which show silver’s dominant patterns we expect this new bull market to continue for some 8 years. That’s the same time the bear market took to complete.

InvestingHaven’s research team is the first one to publish a new rising channel on silver’s price chart. It is the core of our silver predictions for 2020 and 2021. This goes to the core of forecasting: seeing what others cannot see!

In 2020 we will see a slow slope of the rising channel. This may accelerate temporarily in 2021. Bull markets accelerate slowly but surely.

We look at leading indicators in the COT report and inflation indicators to get a sense of the timing of the spikes in 2020 and 2021.

Our Silver Price Forecast for 2020 and 2021

Based on the leading indicators and more importantly the chart setup we see the following silver price forecast for 2020 and 2021.

This is our forecasted silver price for the coming years. Prices reflect silver's spot price.

Leading Indicators for our Silver Price Predictions

We have been successful forecasting silver prices in recent years.

To illustrate this we go back to April of 2017 where our silver price forecast was published on MarketWatch: Silver has peaked for the year. We were spot-on. The set of circumstances were not in favor for a strong year in gold nor silver.

In May of 2019 however we were very vocal and convinced about a gold and silver price breakout, and said so in Why gold’s a ‘bargain’ at less than $1,300 an ounce which was published on MarketWatch. Even Barron’s picked up our forecast, and featured it on May 3d: How Gold Could Stage a 20% Rally This Year.

Those silver price predictions are accurate because silver has a number of reliable leading indicators for its future price.

One very reliable leading indicator is the inverted Dollar correlation, though this is a directional indicator. It works on a secular level, not on a day-to-day level. This is an important misconception for many investors!

Similarly, the inflation vs deflation indicator works in a similar way.

One of the most reliable leading indicators for the future price of silver is the silver futures market COT report.

The way to understand this indicator is that it signals a bottom or top when hedge funds have extremely low or high positions. The shape of the subsequent change in net positions is what helps understand whether there is a bull market or bear market in the price of silver.

We look at all those leading indicators, combine it with silver’s chart patterns, and use this as the input for our concrete silver price prediction.

Leading Indicator: Silver COT

When it comes to the silver COT report we look at extreme net positions of non-commercials. Every time non-commercials are in the 60,000 to 80,000 contracts net long it tends to signal a major peak in silver’s price.

When it comes to the extreme low level of net long contracts by non-commercials, we see 2 potential scenarios:

1.      Either their positions drop close to zero. This comes with a serious price drop. It tends to happen in a silver bear market.

2.      Either their positions drop but remain significantly positive as the price correction ends. This tends to happen in a silver bull market.

After silver’s major peak in 2011 we saw many drops of silver’s price close to zero for both noncommercial and commercial traders. The ultimate test for 2020 and 2021 will now come soon, and we expect silver’s price correction to come with a significantly higher number of contracts for traders.

All data points mentioned above are visible in the center panel of below chart.

Leading Indicator: Silver to Dollar inverted directional correlation

The 2nd leading indicator for silver’s future price is the Dollar inverted correlation.

The next chart shows the Dollar in light grey, but it is inverted. That’s because it is easier to follow the correlation.

In the last 2 decades the silver price chart has tracked the price of the Dollar (inverted) with just 2 exceptions (2013/2014 and 2017). Those exceptions only tended to last 9 months.

That’s exactly why our point is that both markets track each other (inverted) directionally.

Right now, we tend to see a wide range in which the Dollar trades. As long as the Dollar remains in this range it will not hinder silver to move higher, every time the other leading indicators are supportive. That’s the way to read this chart and make it insightful for silver’s future price.