With the recent correction, silver prices have become quite attractive. Not only that, but silver premiums are quite low right now. The normal range is around 12%-15% above spot, and that can be had currently, though mostly at the higher end of that range, highlights Peter Krauth, editor of Silver Stock Investor.
Consider that in the depths of the Covid pandemic, many were paying up to 75% or more above spot. Supply was so tight that sky-high premiums lasted a few years and deliveries were much longer than normal. But reasonable premiums, along with somewhat-lower prices, suggest now may be a great time to buy physical silver.
As you can see from the chart below, silver has corrected significantly in recent weeks, down about 14% in short order.
So, what happens next?
Silver has reached my target range of $28-$29 and has already bounced. That bounce is supported by the severe drop in momentum indicators, which are likely to turn higher. The RSI went below 30 and has just turned up. I think we could see silver bounce to test the $30-$31 level, at which point it could see a second leg down, back to the $27-$29 level.
This would be supported by a possible near-term, oversold rally in the US dollar, which may get pulled back up to the 105 area (200-day) before meeting renewed overhead resistance.
I think the dollar will then resume a new leg down, possibly testing the 100 level. If this plays out, once the dollar index peaks and reverses lower, we should have a great buying opportunity in silver and silver miners alike.
As we navigate the next few weeks, I advise cautious bullishness. While we may have seen the lows in silver, I think there is still some risk of a small rally, followed by a second leg down.
With that in mind, I think it makes sense to buy into any new positions by adding in tranches. And that’s probably a good idea for both physical silver and silver miners alike.
