Silver’s AI Boom: The Next Big Trade You Need to Know | Don’t Ignore This Chart!

Over the past few years, “AI trading” has gone from being the hottest trend to becoming the centerpiece of portfolios. The reason for this shift is clear: it is hard to imagine a future technology without AI.

But while AI trading centers around common targets like semiconductors and various large-cap tech stocks, silver is a critical, yet overlooked, component that feeds the entire AI industry.

Silver’s Role in the AI ​​Industry

Silver is not the only metal in the production of AI technology. Its role is important. Without silver, AI and many electronic technologies would not exist. Silver is an indispensable metal in the production of AI technology, as it is used for thermal conductivity, semiconductor manufacturing, sensors, connectors, and solar cells.

The Silver Institute projects global silver demand this year to reach about 1.2 billion ounces, the second-highest level on record. Despite more silver being produced to meet industrial demand, analysts still believe the market will post a fourth consecutive year of deficits.

Silver’s 5-Year Seasonality Chart

Use StockCharts’ Seasonality Chart tool to examine the 5-year seasonal performance of silver ($SILVER).

Chart 1. Silver’s 5-year seasonality chart. Note the volatile quarterly performance.

First, why a 5-year seasonal chart? The answer is that it puts more weight on the industrial demand for silver and AI trading that started in the year before the COVID lockdown. Still, if the market has been undersupplied for 4 years and demand has continued to grow, you might wonder if the current price has somehow been ‘suppressed’, setting the stage for a big surge.

• Over the past four years, silver has returned an average of 8.5% this month (the average return is at the bottom of the bar).
• August and September show the summer slump, with September’s numbers looking particularly bleak.
• October through December were the best months, outperforming March through May in terms of average returns and even closing rates to some extent (these figures are shown above the bars).

Silver’s macro view shows a major breakthrough.

Looking back on the silver’s performance over the past 16 yearsPlatinum is trading outside of a wide (and very ugly) four-year trading range.

Chart 2. Silver weekly chart. Silver just broke out of a 4 year (and very volatile) trading range.

The Chaikin Money Flow (CMF) indicator shows how the rally is responding to increased buying pressure. The current readings are not as dramatic as those seen in 2010 and 2011, but it is a place where we can make informed guesses as to whether or not this move is about to begin.

Silver prices have broken through the four-year resistance level of $30, but are facing technical headwinds around $36, $44, and just below $50 (the highest levels reached were $49.45 in 1980 and $48.70 in 2011).

Are big investors just sweeping up what individual investors are throwing away?

Before we look at the daily chart from a tactical perspective for some potential entry points, let’s first compare the silver futures market ($SILVER) to the iShares Silver Trust ETF (SLV), focusing specifically on their differing readings. CMF stands for buying and selling pressure.

Chart 3. Daily chart comparison of Silver Futures and ISHARES Silver Trust ETF. Note the difference in fund flows between the two.

The price correlation between the two markets is very tight because SLV is a commodity-based ETF. But look at the difference in the flow of funds. The futures market is showing positive numbers while the ETF is falling into negative territory.

Does this reflect the sentiments of different types of market participants, i.e. institutional investors (or commercial traders) versus retail investors? If so, Could this indicate that large corporations are buying products that retailers are selling at a discount? It’s something to think about.

Analysis of SLV’s short-term price movements

Take a look at the daily chart of SLV below. StockCharts Technical Rankings (SCTR) As the score crosses the 90 mark, it is showing technical strength across multiple indicators and time frames.

The CMF is below the zero line, indicating that retail investors may be liquidating their positions. But is there a quiet accumulation happening among institutional investors amidst retail selling in the futures market?

Chart 4. Daily chart of SLV. The difference in CMF is obvious, but given how it almost contradicts the reading we get from silver futures, it almost changes the story the chart is telling.

Look at the trendline (black) on the SLV chart. If the seasonal trend of silver is realized, a short-term bearish trend is expected. The price of SLV is likely to test the trendline first (whatever the current price range is) before testing the most recent swing low of $26.00. If the price breaks below that level, we can expect support at the next major swing low of $24.00.

If prices break below that, there may be additional support at successive swing lows, but the macro picture would need to be reexamined before taking any further action.

Add the following two charts to your StockCharts ChartLists:

$SILVER Chart The silver futures (continuous contract) price movement looks like this: iShares Silver Trust ETF (SLV). ETFs are designed to track futures, but look closely. These small technical differences can lead to hidden market opportunities.

Deadline bell

Many retail traders don’t see it, but silver is shining in the AI ​​world. The rise of AI as a portfolio staple has highlighted silver’s important role in technology production. But there’s one problem: Silver supply may not be able to keep up with the surging demand. While silver futures are seeing strong buying, retail investors are dumping the SLV ETF. The big players could be wiping out what retail traders are selling, which could set the stage for a massive price surge later this year.

disclaimer: This blog is intended for educational purposes only and should not be construed as financial advice. The ideas and strategies should not be used without first evaluating your personal and financial situation or consulting a financial professional.