Copper's Surge is a Bullish Omen for Silver

Copper’s breakout signals further upside for the metal, which bodes well for silver due to their strong correlation.

Over the past few months, I’ve maintained a consistently bullish outlook on copper, anticipating a rebound off the $4 per pound support level and a strong rally. This scenario has particularly intrigued me because a surge in copper would provide a significant tailwind for silver. I believe copper’s sluggish performance has been a key factor holding silver back, as the two metals are highly correlated, with arbitrage algorithms reinforcing their relationship. In the past week, my expectations were validated when copper broke out of a major triangle pattern that had been forming since May.

As the chart below illustrates, copper rebounded off the $4 support level at the start of January, quickly surging higher and breaking out of the triangle pattern—a strong signal that further bullish momentum is likely ahead. Several factors have fueled this rally, including technical buy programs kicking in, stockpiling in anticipation of potential tariffs, and expectations of a major stimulus program as China’s economy continues to suffer. Additionally, robust demand stemming from electric vehicles, data centers, and renewable energy has further supported copper’s strength (for more on this, check out my recent article).

The longer-term weekly chart provides valuable perspective on copper’s recent breakout and highlights the critical $5 to $5.20 resistance zone overhead—my next price target now that copper broken out. A decisive break above this zone should herald a full-blown bull market, which would also be highly beneficial for silver. I’ll explore this correlation in more detail later in the article.

I frequently show a proprietary indicator I developed, the Synthetic Silver Price Index (SSPI), which helps validate silver’s price movements and filter out potential fakeouts. This index is the average price of copper and gold, with copper adjusted by a factor of 540 to prevent gold from disproportionately influencing the index. The SSPI closely mirrors silver’s price movement, even though silver itself is not an input.

Since launching this newsletter in September, I’ve been highlighting how the SSPI has remained below the critical 2,600 to 2,640 resistance zone, emphasizing that a breakout above this level would serve as a strong bullish confirmation for silver. As of Friday, thanks to the impressive rallies in both copper and gold, that long-awaited breakout has finally happened! This signals that a strong breakout in silver is likely imminent.