What Happens Next When Precious Metals Consolidate For A Long Time

I’ve been looking at silver for quite a while, and its chart looks bearish to me. Silver has been swinging sideways in a very narrow range for a long time (4 months).

*Gold and silver move in the same direction most of the time. If you can predict silver, you can also predict gold.

This is a bearish pattern because based on what I’ve seen, silver’s medium-term tops tend to be flat.

But you know that I’m not a chartist – I prefer facts and data vs dogma and charts. So here’s the data to prove my thesis.

I use standard deviations as a percent of silver’s price to determine how volatile silver has been.

Silver’s standard deviation over the past 4 months is now merely 1.7% of its price. This is an extremely low standard deviation.

Here’s what happens next to silver when its 4-month standard deviation is 1.7% (excluding overlapping cases over the past 4 months).

Here are silver’s historical returns.

Click here to download the data in Excel.

Conclusion

This is a medium-term bearish sign for silver. Look at silver’s historical forward returns for the next few months. Almost all bearish.

But this raises a more important long-term question. I previously thought that gold and silver are in new bull markets. I’m seriously starting to doubt this case. Perhaps silver is still stuck in a long sideways bear market.

Long periods of low volatility are hallmarks for silver’s historical bear markets. In other words, silver’s volatility shouldn’t be this low if it is in a bull market.

All of the above historical signals occurred when silver was in a bear market. None of them occurred when silver was in a bull market.