KEVIN BAMBROUGH: Silver Overbought Doesn’t Mean Over!
For decades, I've gazed onto trading screens, watched tickers scroll, and felt both the rush of a moonshot and the sting of a sudden reversal. If you’ve been around long enough, you know the narrative well. “Silver is overbought,” say the experts, pointing to a stretched RSI or a yearly chart that looks more mountain than plateau. And, yes, eventually, the crowd will be right. Tops do form. Corrections do come. But here’s the part I learned staring at those screens and studying history’s data sets on restless nights: overbought doesn’t mean over, the correction might happen way down the road, and even then, it could just be a couple of percentage points..
Study the history of silver and you'll see some of the greatest percentage gains came after that big, scary “overbought” signal flashed red on the monthly RSI.
Rethinking Overbought in Silver Markets
We’re hardwired to seek safety. When a market looks stretched, every instinct says, “Not now, it’s too late.” But silver teaches us a different lesson, if we’re paying attention.
I look at the RSI, the Relative Strength Index, every month. It’s not just a measure of price, but momentum, emotion, irrationality. When it crosses 70 on the monthly, commentators start to warn of danger. “It’s overbought.”
Lessons From the Past
Sometimes, truths hide in plain sight. Here’s what the data says about key times when silver was “overbought” during in past bull markets:
Looking at the chart at the top of this article, the so-called "overbought" moments in silver, as defined by an RSI above 70, don’t always signal the end of a rally. Instead, they often mark the beginning of sustained upward momentum. Historically, these instances frequently precede significant price movements, where enthusiasm builds rather than diminishes. This pattern suggests that the emotion and momentum captured by the RSI can sometimes indicate untapped potential rather than impending risk. It’s a reminder to approach these signals with nuance, recognizing that a high RSI is not necessarily a stop sign—it might just be the start of an extraordinary run.
Let's take a look at the history of Silver and when that RSI overbought warning has flashed before in past bull markets.
May 1967 - Jun 1968: Silver rose from $1.60 (RSI 91.91) to $2.50 in 13 months (+56.25%), with RSI easing to 77.17.
Feb 1973 - Feb 1974: Silver climbed from $2.49 (RSI 75.56) to $6.70 in just a year (+169.08%), with RSI at 82.55.
Jan 1979 - Jan 1980: Silver skyrocketed from $6.75 (RSI 73.31) to $48.00 in just a year (+611.11%), with RSI reaching 80.56.
Dec 2003 - Apr 2004: $5.93 (RSI 70.16) to $8.21 in 4 months (+38.45%), with RSI jumping to 80.11.
Jan 2006 - May 2006: $9.81 (RSI 73.58) to $14.75 in 4 months (+50.36%), with RSI dropping to 64.66.
Feb 2008 - Mar 2008: $19.80 (RSI 75.81) to $20.74 in 1 month (+4.75%), with RSI rising to 80.15.
Oct 2010 - Apr 2011: $24.74 (RSI 73.84) to $48.45 in 6 months (+95.84%), with RSI reaching 82.17.
Jul 2020 - Aug 2020: $24.34 (RSI 70.21) to $28.91 in 1 month (+18.73%), with RSI at 71.01.
Each cycle is a meditation on patience and conviction. The gains after “overbought” matter more than the warnings that preceded them.
CONTINUED…
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