The Silver Rally Could Turn Epic As Inflation Continues To Climb


  • Despite the rate increase Wednesday silver is continuing to move higher and is now starting to noticeably outperform gold.
  • Inflation is heating up and is likely to continue higher. Moreover, there is now a 100-basis point disconnect between the CPI, and the PCE.
  • It appears the Fed's inflation gauge (PCE) is downplaying inflationary pressures, suggesting the Fed could enable real inflation to go much higher.
  • The gold to silver ratio is coming off an extreme level of over 80 and implies the silver rally is just getting started.
  • Higher than anticipated inflation coupled with several other constructive factors are likely to drive SLV/silver prices significantly higher going forward.


Silver Rally Could be Epic as Inflation Continues to Climb

Silver/iShares Silver Trust (NYSEARCA:SLV) rose by more than 1% on Wednesday, despite the Fed’s decision to increase the Federal funds rate by another 25 basis points. Perhaps even more significant is the fact that SLV has appreciated by about 5% over the past several trading sessions leading up to the Fed decision. This is a stark difference to the silver selloffs that usually precede telegraphed rate hikes. So, what is it this time, has something changed in the silver market?

It’s all about inflation, and there are clear signs the inflation situation is significantly hotter than the Fed is seemingly implying. In addition, the gold to silver ratio is beginning to back off extreme highs, silver is staring to noticeably outperform gold, and the dollar could provide additional tailwinds to silver’s already favorable backdrop. Ultimately, the combination of these underlying factors coupled with higher than anticipated inflation will likely drive silver prices significantly higher in the second half of this year and beyond.

Background Information About SLV

SLV is an exchange-traded fund that is designed to give investors a cost-efficient way to gain access to the silver market without having to buy silver futures or the physical metal. The SLV ETF fund is engineered to mimic the spot price of silver. Each share owned by an investor represents a fractional ownership in the fund, which holds over 325 million ounces of physical silver worth roughly $5.33 billion.

SLV is an efficient and convenient trading vehicle, as it mimics silver's spot price, yet investors do not need to deal with exchanges that facilitate futures contracts, and do not have to pay prices over spot to procure the physical asset. It is also very liquid and can easily be bought and sold like any

ChartGLD data by YCharts

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This article was written by

Victor Dergunov profile picture
The #1 Service For Diversified Portfolio Profits

Hi, I'm Victor! It all goes back to looking at stock quotes in the old Wall St. Journal when I was a kid. What do these numbers mean, I thought? Fortunately, my uncle was a successful commodities trader on the NYMEX, and I got him to teach me how to invest. I bought my first actual stock in a company when I was 20, and the rest, as they say, is history. Over the years, some of my top investments include Apple, Tesla, Amazon, Netflix, Facebook, Google, Microsoft, Nike, JPMorgan, Bitcoin, and others.

Disclosure: I am/we are long SLV. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am long SLV and SLV call options

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