The Silver Squeeze Has Officially Begun
Authored by Jesse Colombo via Substack,
For the past several weeks, I’ve been writing articles and creating video presentations about an imminent silver breakout that could quickly push prices to $50. During this time, I’ve observed significant investor cynicism, as many grew frustrated with silver’s sideways movement over the last five months. In that content, I encouraged investors to remain confident, as I believed silver was on the brink of a historic bull market. Sure enough, on Friday, what began as a typical day saw silver surge nearly 7%, meeting the criteria I had outlined to confirm the next phase of its bull market. In this article, I will break down the details of silver’s Friday breakout and explain why a powerful silver squeeze has now officially begun.
The key criterion I outlined to confirm the next leg of the silver rally was simple yet widely overlooked by investors and surprisingly difficult to achieve: the spot price of silver must decisively close above the $32.50 resistance level, supported by strong trading volume. The $32.50 resistance level was set at the May high, after which silver retreated and stagnated over the summer. Silver made attempts to break through this level on September 26th and October 4th, but both attempts failed, resulting in further pullbacks. Silver’s impressive $2.02 (6.38%) surge on Friday, accompanied by trading volume more than double the prior week’s average, definitively fulfills that criterion. (A caveat to consider is that if silver closes back below the $32.50 resistance level, it would invalidate Friday’s bullish signal. However, I find that scenario unlikely.)
Although Friday’s trading began like any ordinary day, volume surged in the afternoon as it became evident that silver’s breakout above the $32.50 resistance level had staying power. It’s likely that a good portion of this volume came from traders scrambling to cover their short positions—a topic I’ll explore in greater detail later in this article. The heavy trading volume serves as a crucial confirmation of silver’s breakout, signaling that major institutions or ‘smart money’ are getting on board. This significantly reduces the likelihood that this is a false breakout.
The next condition I outlined was that silver priced in euros must decisively close above the €30 resistance level, which was established at the May peak. I stated that this event would help confirm a close above $32.50, greatly reducing the chances of it being a false breakout. I find it valuable to analyze silver priced in euros, as this approach removes the impact of U.S. dollar fluctuations, offering a clearer view of silver’s intrinsic strength or weakness. Notably, silver priced in euros often respects round numbers like €26, €27, and €28, frequently establishing key support and resistance levels at these points. On Friday, silver finally broke through the €30 level with such momentum that it even closed above €31, signaling the strong potential for further gains in the coming week.
The final condition I listed is more esoteric, but I believe it will significantly reduce the likelihood of a silver breakout being a false one: an index I developed, called the Synthetic Silver Price Index, must close above its key resistance zone between 2,560 and 2,640. This index represents the average of gold and copper prices, with copper’s price adjusted by a factor of 540 to prevent gold’s higher price from disproportionately influencing the index (to learn more about this methodology, please watch the recent presentation I created). The price of copper is an often overlooked factor in silver’s performance and rivals the influence of gold. The index closely mirrors silver’s price movements, yet surprisingly, silver’s price itself isn’t even an input!
Although the Synthetic Silver Price Index didn’t break out on Friday, it still posted a solid 1.21% gain. Given the sheer strength of silver’s breakout, I’m choosing to overlook this criterion for now. I expect a breakout in the index is still forthcoming, which will further validate silver’s rally and likely provide additional momentum to its current upward trajectory. The index didn’t break out primarily due to copper’s weakness over the past few weeks. However, with a rebound in copper likely soon (as I’ll explain shortly), this should help the index break out in the near future.
Gold, a major driver of silver prices, is generating a strong tailwind for silver after breaking through two key resistance levels since September. By every measure, gold is in a confirmed uptrend, and I believe it’s on track to reach $3,000 in the near future. This momentum should continue to bolster silver’s rally. While gold reaching $3,000 might a bit far-fetched, it’s actually quite realistic, as it’s just over a 10% increase from today’s price.