Silver Market Update

By: Clive Maund | Sun, Nov 21, 2004
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While gold's rate of rise has accelerated significantly over the past couple of weeks, silver has only succeeded in moving ahead incrementally. The reason for this is plain to see on the 6-month chart - the price is continuing to be restrained at the top return line of a clearly defined trend channel. Looking at this chart in isolation we would probably conclude that it is more likely to retreat than advance from here - which is why we are not looking at this chart in isolation.

Much greater overall perspective is provided by the chart going back to July 2002, this starting point being chosen so that we can place the point of origin of the parabolic uptrend shown on it. Notice how the price has found support at this parabolic uptrend on 5 occasions, and above it in October 2003, so there can be no doubt that this is a valid and important trendline - this provides us with the security of having a predetermined exit point - if the price breaks below it, it is a clear sell signal. Having said that, it is not expected to. On the contrary, given the accelerating uptrend in gold and the parlous outlook for the dollar, silver is expected to break out of the trend channel shown to the upside, which should lead to a rapid ascent. There is some resistance in the area of last April's high, but it is not likely to prove to be much of a hindrance, as the price did not remain up there for long, so there is little overhanging supply.

Should the dollar now plunge as expected and gold make a run at its upper long-term trendline, meaning a move to the $480 - $500 area, silver is expected to race ahead to a peak considerably above last April's high in the $8.40 area. Such a move would result in an extremely overbought condition, of course, and take the price way ahead of its parabolic support line, and it would therefore be expected to be followed by a reaction/lengthy period of consolidation.

US dollar charts may be viewed in the Gold Market update


 

Clive Maund

Author: Clive Maund

Clive Maund,
CliveMaund.com

The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maunds opinions are his own, and are not a recommendation or an offer to buy or sell securities. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications.

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