Fortunately, when it comes to the bigger picture, we haven’t seen any real technical damage, and the Silver/Gold ratio continues to remain in a long-term uptrend, though, this is contingent on silver holding the $21.50/oz level. So, while it’s easy to throw in the towel and I would not rule out a re-test of the recent low at $22.50/oz, I remain bullish on the price of silver long-term, especially given the recent capitulation in bullish sentiment.
(Source: Daily Sentiment Index Data, Author’s Chart)
As shown in the chart above, bullish sentiment for silver has fallen off a cliff in the past six months, descending from single day readings of more than 90% bulls in late February to a reading of barely 10% bulls on Wednesday. This exodus from the bull camp is a great contrarian indicator, with silver typically finding strong buying support on further weakness when readings dip to these depressed levels. As the chart above shows, this plunge in short-term sentiment has pushed the long-term sentiment moving average for silver to its lowest levels in years, with a current reading of 24%.
This is the worst reading since September 2018, which ended up marking a bottom for silver. While silver did fall another 4% after hitting a reading of sub 25% bulls on its long-term moving average, the metal was 9% higher over the next six months and 24% higher just 12 months later. This represented an attractive forward 12-month return drawdown to forward 12-month return of 6 to 1.
Moving over to the technical picture, we can see that silver has remained in a steep downtrend since June, making lower highs and lower lows, with a massive shake-out in early August. This would be concerning from a technical standpoint if the long-term chart confirmed it.
However, a look at the…