Interest rates look like they may finally be topping after one of the most aggressive tightening cycles in decades, yet almost no one is talking about the precious metals.
That silence is the tell.
When the market's attention is locked onto the Fed, stocks, and the next data point, and gold and silver are treated as afterthoughts, the conditions that usually mark a durable bottom are often forming. As the opportunity cost of holding nonyielding metal starts to ease, silver tends to wake up last, lagging gold, and then move the hardest.
Silver may become relatively more attractive if the economy keeps chugging along. Unlike gold, which is valued almost entirely as a monetary and safe-haven metal, silver is also an industrial commodity. A sizable share of demand comes from electronics, solar panels, electric vehicles, and other manufacturing uses. That does not make silver a substitute for gold in a crisis, but it can tilt the comparison in silver's favor when growth holds up and industrial use stays firm.
The 10-year yield has been surging, doing the dirty work for the Fed, and on Wednesday extended its winning streak to seven, closing near session highs while shrugging off a doji last Friday and back-to-back shooting stars to start this week. That is impressive as those patterns are often adept at signaling exhaustion. Additionally it is trading at a white hot 80 RSI.
However, we know instruments can stay overbought for some time. The fact that the last 10 weeks have all closed at or within the top of the weekly range for 10 straight weeks suggests this rally could still have legs.
On the weekly time frame, the 10-year Treasury yield looks technically strong with a potential target of 6.4%, derived from the measured move of its cup base breakout above 5%. Last week marked the yield's first weekly close above that critical 5% threshold since July 2007.
This historic resistance zone has a clear track record. Back in November 2023, the start of the cup pattern made a sharp U-turn just shy of the "round" 5%, topping out at 4.97% before plunging 6% on a bearish evening star setup, followed by a confirming doji candle the very next week. Notice the traditional weakness that ensues when the RSI forcefully clears the 70 level, doing so twice in 2022 and once in 2023. Déjà vu?
While another leg higher in yields would temporarily pressure silver, any resulting drawdown should remain limited. Given the broader macro picture, accumulating silver for the long term remains a sound strategy.
The 10-year yield was trading around 5.3% Thursday.
Turning to silver's monthly chart, the setup offers plenty to like. On the ratio chart against the State Street Materials Select Sector SPDR Fund, relative strength is pulling back quickly toward a major double-bottom breakout level from last September. At the same time, monthly RSI has cooled significantly, dropping nearly 40 points back toward the neutral 50 line.
Price action is now approaching a critical multidecade zone. A 35-year bullish ascending triangle breakout aligned with the very round $50 mark. This level capped major tops in both 1980 during the Hunt Brothers rally and again in 2011. Now that silver has blown past that historical ceiling toward its $121 high, former resistance should flip into major structural support upon a retest.
This pullback presents an exceptional long-term risk/reward entry zone. Investors can afford to remain patient and look to build positions near the $57-$58 range to play against this macro floor.
Silver was trading around $61 Thursday.
Doug Busch is the senior technical analyst at Barron's Investor Circle. His technical view is added to stock picks, including those published exclusively for Investor Circle readers. A glossary of technical terms is updated regularly with new entries.