The financial markets have been all over the place this week, with stocks swinging back and forth without a clear direction.
The session opened on a positive note after a benign U.S. Consumer Price Index (CPI) report showed core inflation rising just 3.1% in February, lower than expected. This initially lifted stock indices, but the rally quickly faded as selling pressure took over, signaling market weakness and hesitation to rebound after recent declines.
Amid the uncertainty, gold and silver stood out as bright spots, gaining 0.89% and 1.8%, respectively, and moving toward a key technical breakout that could mark the next leg of the precious metals bull market.
Gold has shown impressive resilience in recent weeks, holding steady even as the broader markets plunged—a clear sign of strength. Over the past year, its powerful nearly $1,000 per ounce uptrend has been punctuated by healthy consolidations, and this recent pause appears to be another of those necessary breathers.
I closely track $100 increments in COMEX gold futures, as they often serve as key support and resistance levels. Despite a few attempts to dip below $2,900, gold has held firm, and today’s rise suggests it may finally be ready to challenge the critical $3,000 resistance—a level of immense psychological significance.
A decisive, high-volume close above this threshold should pave the way for even greater gains, potentially pushing gold toward $3,380 in this rally, assuming it follows its trajectory of the past three economic cycles.
Let’s turn to silver, which had an impressive day, finally closing above the critical $32 to $33 resistance zone—a level it had struggled to break all year. Once silver clears this barrier, it’s likely to surge.
Fortunately, we may now be witnessing the early stages of that breakout. However, for stronger confirmation, I want to see a decisive close above the $34 to $35 resistance zone that formed at the late October high.
Once that happens, I believe silver will have nothing holding it back, setting the stage for a move into the $40 to $50+ range.
While most people instinctively recognize gold’s influence on silver prices, fewer realize the significant role copper plays in influencing silver’s movement. This understanding led me to develop the Synthetic Silver Price Index (SSPI)—an indicator designed to validate silver’s price movements and filter out potential fakeouts. The SSPI is calculated as the average price of gold and copper, with copper adjusted by a factor of 540 to ensure gold doesn’t disproportionately impact the index. Remarkably, despite silver not being an input, the SSPI closely mirrors silver’s price movements.
For several months, I’ve been closely watching the SSPI as it struggled to break above the critical 2,600 to 2,640 resistance zone, repeatedly emphasizing that a breakout above this level would be a strong bullish confirmation for silver.
Thanks to recent impressive rallies in both copper and gold, that long-anticipated breakout has finally occurred, signaling that a significant move in silver is likely imminent.
The Synthetic Silver Price Index is gaining strong momentum, fueled by rallies in both gold and copper, which are in solid technical positions.
Copper recently broke out of a triangle pattern, sparking a strong uptrend. The next key test is the $5 to $5.20 resistance zone—if copper can achieve a decisive close above this level, it should trigger an even stronger phase of its bull market.
Given their correlation, this breakout would likely propel silver to impressive new highs as well.
Meanwhile, one of the key reasons precious metals have remained strong recently is the sharp decline in the U.S. Dollar Index.
Since the Dollar Index and precious metals move inversely, weakness in the dollar typically fuels bullish momentum in gold and silver, and vice versa.
The dollar’s surge leading up to and following the U.S. presidential election triggered a steep drop in gold and silver, leading many to believe the rally was over—but that wasn’t the case.
Interestingly, one of the primary drivers behind last fall’s surge in the U.S. Dollar Index—coinciding with Donald Trump’s increasing odds of winning the presidential election—was a massive influx of global capital into the U.S. stock market.
Much of this capital flowed into the so-called “Magnificent Seven” stocks: Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA, and Tesla.
The chart below compares the U.S. Dollar Index with the Magnificent Seven ETF (ticker: MAGS), highlighting their strong correlation during both the fall rally and the recent sharp decline.
This pullback in the Magnificent Seven—stocks that I believe are caught in a speculative bubble—has contributed to the dollar’s weakness, which, in turn, has provided a tailwind for precious metals.
There’s even more good news for precious metals and mining stock investors.
As Crescat Capital’s macro strategist Tavi Costa recently highlighted, the U.S. Dollar Index is currently at one of its most overvalued levels relative to other fiat currencies in over 120 years of data. Similar extremes in 1933 and 1985 were short-lived and followed by significant devaluations.
Given this historical precedent, there’s a strong probability of further dollar weakness ahead—an outcome that would be highly favorable for precious metals and mining stocks.
Another factor weighing on the dollar and stocks—while providing a tailwind for gold and silver—is the growing risk of a recession.
A noteworthy development in the past few days is the sharp breakdown of the bellwether S&P 500 index relative to gold.
As shown in the chart below, the S&P 500-to-gold ratio has fallen below the key 2.00 support level this week and is now on the verge of breaking below a long-term uptrend line dating back to 2011.
This signals a major capital rotation from stocks into gold, a shift that historically precedes periods where gold significantly outperforms equities.
Such transitions often mark the beginning of the most explosive phases of a precious metals bull market as well as equity bear markets. Note that the monthly S&P 500-to-gold ratio candle needs to close under both support levels for full confirmation.
This week’s breakdown in the S&P 500-to-gold ratio further reinforces the trend I’ve highlighted in recent months with the Dow-to-Gold ratio. That chart showed a major breakdown beginning a year ago, and the decline is now accelerating.
This signals that the precious metals bull market is still in its early stages, rather than nearing maturity, implying significant upside potential ahead.
The ratios of major U.S. stock indices to gold have much further to fall, as they remain deeply entrenched in a massive bubble—one confirmed by multiple indicators, including the S&P 500’s cyclically adjusted price-to-earnings (CAPE) ratio.
As the bubble deflates and valuations revert to the mean, I see trillions of dollars flowing into precious metals and mining stocks, driving them significantly higher.
I ultimately see gold reaching at least $15,000 per ounce and silver surpassing $300 as these bubbles burst, triggering a massive financial reset.
In summary, gold and silver remain in strong positions, holding up well despite recent volatility in global financial markets.
I have a strong sense that a major breakout is imminent, but full confirmation is needed—specifically, COMEX silver futures must close above the $34 to $35 resistance zone, and COMEX gold futures must surpass the critical $3,000 level.
Once these breakouts occur, I expect the next phase of the precious metals bull market to shift into a much more dynamic and powerful stage, contrasting with the steady, orderly climb of the past year.
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