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Another day, another confirmation of the great silver disconnect.
My analysis today will be rather brief, as what we saw in the past 24
hours simply confirmed what I had posted yesterday and what I’ve
been writing previously.
Silver is up over 6% today, and miners are flat – it’s
obvious that not all of their drivers are aligned.
When silver finally tops and declines, it’s likely to slide
profoundly – likely to the $50 – $60 area. What used to be a
daring bullish target area is now a distant support. Truly remarkable
for the white metal.
It could top any day or hour now, but the momentum is so extreme that
it might as well continue. If silver soars all the way up to $120, I will likely consider taking profits
from the investment position, as that’s where the next technical
target is.
You see, years ago, silver used to follow a very specific pattern.
Each subsequent top could have been forecasted based on the previous
ones using the Fibonacci extension. I applied this technique to the
previous tops, and it worked remarkably well.
This technique doesn’t tell us anything about the interim tops,
but it did pinpoint the key ones with great accuracy. The $120 target
that it’s currently pointing to has one additional feature
– it’s above the level most investors will focus – $100.
This means that silver will be after a major breakout when it moves to
$120… And that’s exactly why it could top there.
The thing is that silver is known for fake breakouts, and while it
didn’t prevent it from soaring past $50 recently, it did work on
multiple other occasions, so it should be kept in mind. This makes the
case for the $120 top stronger.
As I wrote earlier today, mining stocks are flat. After their early
attempt to move higher, they moved back down – in tune with
their long-term resistance that I discussed yesterday.
The likely reason behind it?
The sizable daily decline on the stock market.
It’s not just any daily decline, either. It’s an
invalidation of the breakout above the 2025 high – an important
sell signal.
Remember how I told you that miners were much more likely to react to
declining stock prices than silver due to the latter’s unique fundamental situation? That’s exactly what’s going on.
Right now, silver is soaring while miners are flat, but when the USD
Index moves higher and the entire precious metals sector declines, the
dynamic is likely to change. Namely, miners are likely to decline more
significantly and/or with smaller rebounds than silver. Or perhaps
they will fall hard together.
And that’s the thing – the USD Index is still likely to
rally – it just held up very well despite an extreme attack on
the Fed’s independence. Gold stocks are still likely to decline
in the medium term, and this is much clearer than saying that the same
will very likely happen in silver’s case.
Przemyslaw K. Radomski, CFA
Founder
Golden Meadow®
Exploring Mining Podcast with Investorideas – get mining stock news
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