Silver Soars to 2-Month High

(July 18,2023- Nico Isaac)

Why the CPI Data is a Red Herring

The breadcrumbs as to what caused silver’s recent surge do NOT lead back to inflation. So, where do they lead?

Just when I thought I had seen everything, on July 17, UK's news authority The Independent revealed that U.S. Treasury Secretary and former Fed chairwoman Janet Yellen enjoyed a local delicacy of "magic mushrooms" on her recent -- err -- TRIP -- to Beijing.

It's one thing to unknowingly order four portions (yup, that's what the article said!) of a psychotropic fungus to pay your respects to another culture's cuisine.

But what about when investors and traders voluntarily order off the "fundamental" menu of market analysis. The fine print reads: Events drive price trends. The selection of events to choose from is extensive: political elections, economic data, trade wars, weather patterns, supply/demand dynamics, and so on.

And yet, when we consume this forecasting model, it often feels like we're hallucinating. Because in one breadth, a certain news event is said to have caused prices to move one way. Only for that same event to cause an entirely different move in the next breadth.

Take, for example, the recent performance in silver. On July 14, silver prices soared to their highest level in two months. And, according to the mainstream "mycologists," the catalyst for silver's surge was the July 12 consumer price index data, which showed consumer prices rising at the slowest pace since March 2021 in June (July 12 Bureau of Labor Statistics).

Said FX Street on July 15:

"Silver price has climbed above $23.80 as the US inflation has softened more than expected. The monthly headline and core inflation were recorded at a moderate pace of 0.2% against expectations of a 0.3% pace."

In other words: Falling inflation is bullish for silver.

Pardon me? It feels like I'm seeing an alternate reality because for the last three years, everyone from Wall Street to High Street has espoused the narrative that inflation is positive for metals, especially silver. Such as this blurb from CNBC on Jan. 19, 2023:

"Silver prices could touch a 9-year high in 2023 -- with a bigger upside than gold... Insufficient supplies of silver -- as well as its tendency to be a better performer than gold in periods of high inflation -- are the reasons. Silver has historically delivered gains of close to 20% per annum in years inflation is high."

Or this headline from US News & World Report on Feb. 23: "Silver is often considered as 'second gold' and thus an inflation hedge."

Or this excerpt from FX Empire, just minutes before the July 12 CPI report was released:

"The outcome of the [CPI] report will play a crucial role in shaping the Federal Reserve's interest rate policy decisions. This, in turn, will impact the price of silver.

"Investors may turn to silver as a hedge against inflation and currency devaluation, driving up demand and pushing silver prices higher."

"Magic mushrooms" are supposed to be incredibly disorienting. As the person in the article observed after eating them, "You thought you were walking straight but you just fell sideways."

Likewise, investors were initially told rising inflation would prop up silver prices only to be told the opposite amidst a lower-than-expected CPI; that falling inflation was supporting the metal's upside.

So, that leads to the very sobering question: What is driving market trends?

The research we've been publishing over our 44 years in the business strongly points that the answer is investor psychology, which unfolds as observable Elliott wave patterns directly on price charts. In silver's case, we turn to our Metals Pro Service on July 10. This was before the July 12 CPI data went viral, by the way. Our analysis showed this price chart of silver, with a third wave rally just beginning. Wrote Metals Pro Service:

"Silver pushed high enough to confirm three waves down to 22.72. The rise should be wave iii of (iii) with potential to the 24.00 area while price holds above the 0.618 retracement level."

At the end of the day, trading silver (and all precious and industrial metals) carries risk. It's a bit like ordering something totally unknown off a menu in a foreign country. You never know what you're going to get.

But, with Elliott wave analysis, you can at least know the critical, make-or-break price levels for every trade set-up to help minimize risk along the way. For silver (and gold, copper, aluminum, platinum, etc....), whatever your time frame, our Metals Pro Service is the chef's special.

Precious Opportunities Near and Far!

Before the July rally in silver, our Metals Pro Service was ready. For active traders watching the intraday, daily and weekly movements, this service presents detailed analysis from intraday to longer time frames, focusing on meaningful developments underway in gold, silver -- as well as copper, platinum, and more.

Go from following market trends to falling in line with their objective paths of least resistance.