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2022 Should Bring Better Returns for Silver

It’s been a disappointing year thus far for investors in the silver (SLV) space, with the metal down more than year-to-date and the Silver Miners Index (SIL) plunging more than 20%. However, nothing has changed from a fundamental standpoint, evidenced by negative real rates being deeply in negative territory, and industrial demand for silver remains strong. Taylor Dart breaks down why silver remains a buy as we enter a new year.

It’s been a disappointing year thus far for investors in the silver (SLV) space, with the metal down more than year-to-date and the Silver Miners Index (SIL) plunging more than 20%. However, nothing has changed from a fundamental standpoint, evidenced by negative real rates being deeply in negative territory, and industrial demand for silver remains strong.

From a technical standpoint, we haven’t seen any meaningful damage either, with the metal continuing to carve out a massive base-on-base pattern. Let’s take a look below:

Chart, line chart, histogram Description automatically generated

(Source: TC2000.com)

The above daily chart of silver certainly doesn’t inspire much confidence, with the metal making lower highs and constantly re-testing its lows, which is often a precursor to a major support break. However, if we look at the big picture for silver, which holds much more weight, we can see a completely different picture. As shown below, the monthly chart shows an asset class that has broken out of a multi-year base and is now building a 1+ year base atop its prior resistance level.

(Source: TC2000.com)

Generally, multi-year breakouts are very bullish developments, and base-on-base setups are typically continuation patterns. So, if silver can hold the support of its current base at $21.00/oz, I don’t see any reason to lose faith in the bigger bullish picture. This 18-month long consolidation period is the best thing the silver bulls could have hoped for, given that it has put a dent in bullish sentiment, with many throwing in the towel.

Chart, line chart Description automatically generated

(Source: TC2000.com)

This is a little reminiscent of what we saw from the S&P-500 (SPY) in 1981 through 1982. This is because the market broke out of a massive base but then corrected 25% over 18 months in a relatively controlled fashion. For any bulls willing to give the market another try after a decade of disappointing returns, this correction was the last straw for many, pushing some bulls out of the trade just before a new bull market began.

These are two different classes, and history does not always repeat nor rhyme. Having said that, the two setups are quite similar from a technical standpoint, hence why I remain optimistic for silver in 2022. This is because there’s been minimal technical damage inflicted, most of the bulls are defeated, and this combination is often the exact setup we see at the onset of new multi-year bull markets.

So, what’s the best course of action?

With silver in the lower portion of its current trading, I continue to see this as a low-risk buying opportunity for the metal, with new entries below $21.90/oz providing a low-risk first entry point in silver. The easiest way to play this is with the Silver ETF (SLV) or the Sprott Physical Silver Trust (PSLV). However, my preferred way to play silver is GoGold Resources (GLGDF), a Mexican silver producer that has made a new district-scale discovery over the past two years.

To date, GoGold has already proven up more than 200 million silver-equivalent ounces [SEOs] in the Los Ricos District, and it’s looking like there could be more than 300 million SEOs proven up by H1 2024. This would make Los Ricos one of the largest silver discoveries over the past few years and would support 400% production growth from current levels if the company chooses to develop these projects (Los Ricos South and North). Meanwhile, from a technical standpoint, GoGold is much stronger than the silver price, making new all-time highs earlier this year. Given that I prefer to be long uptrends vs. ranges, I see GLGDF as the more attractive way to play the metal.

Chart, histogram Description automatically generated

(Source: TC2000.com)

Silver has had a disappointing year, and understandably, many investors have thrown in the towel. However, for anyone that’s traded the precious metals, it’s not until nearly every generalist investor has been dragged out with disgust that the market can bottom and begin a new uptrend. After 18 months of relentless beatings, I believe we’re nearing that point, suggesting that 2022 should be a much better year for precious metals. My preferred way to play this is by buying dips on GLGDF below $2.00 and buying silver below $21.90/oz.

Disclosure: I am long GLGDF

Disclaimer: Taylor Dart is not a Registered Investment Advisor or Financial Planner. This writing is for informational purposes only. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Taylor Dart expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.


SLV shares were trading at $20.79 per share on Tuesday afternoon, up $0.22 (+1.07%). Year-to-date, SLV has declined -15.38%, versus a 24.55% rise in the benchmark S&P 500 index during the same period.



About the Author: Taylor Dart

Taylor has over a decade of investing experience, with a special focus on the precious metals sector. In addition to working with ETFDailyNews, he is a prominent writer on Seeking Alpha. Learn more about Taylor’s background, along with links to his most recent articles.

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