The ceiling is now a floor

Yesterday’s price action in silver may have been pivotal. Once conquered in 2025, the $50 an ounce level that had served as a ceiling for 45 years turned into a floor. By bouncing decisively off this floor, silver demonstrated that there is strong demand at this level, and that the price is unlikely to fall below it.

However, the test may not be over yet. This spectacular rebound took place as the stock market rallied, signaling that the two are still correlated. For some mysterious reason, investors don’t buy silver when tech stocks are rallying, but they do sell it when they are falling. So long as this correlation persists, silver could still come under pressure.

I suspect that this correlation will only break once the Fed pivots to an easing policy, in spite of persistent inflation. Investors will be shocked to discover that nobody is coming to save them, and that they must protect themselves against inflation.