It’s been another rough month for the precious metals bulls, with the price of silver (SLV) down another 2% this month and nearly 15% year-to-date. However, while the precious metals continue to massively underperform other asset classes, sentiment is finally in a zone where we often see durable bottoms.
Meanwhile, we saw a sharp reversal at a key level following the Federal Reserve meeting, suggesting that the low might finally be in for the industrial metal. Assuming the low is in, we should see meaningful upside for two of the best silver names in H1 2022, with these two names being SilverCrest Metals (SILV) and GoGold Resources (GLGDF). Let’s take a look below:
(Source: Daily Sentiment Index Data, Author’s Chart, TradeFutures.com)
Looking at the chart above, we can see that silver has spent several weeks since August below the 20% bulls level, suggesting that there are four bears for every one bull when it comes to the sentiment among market participants for an extender period. If we look back over the past three years, this is quite rare, with most trips below the 20% level being very short-lived. This makes the recent bout of persistent pessimism encouraging, given that these periods of extreme pessimism often push most investors offside and out of a trade at exactly the wrong time.