Silver Market Update
Originally published August 26th, 2012.
The sharp advance by silver last week was presaged by the late July breakout from the important "inner" downtrend that we had earlier delineated, which had been in force from early March, as we can see on the 8-month chart for silver shown below. So is that it - are we on our way now? - almost, but there is one remaining major hurdle left to clear. Before going on to consider what that is we should take note of the fact that silver is now critically overbought short-term overbought as shown by its RSI indicator, and it has also run into a still falling 200-day moving average, factors which point to a high probability of it pausing to consolidate or perhaps react back somewhat in the immediate future - if it does keep going higher near-term, the advance is likely to be measured. The fact that the 50-day moving average is still some way below the falling 200-day also suggests that some more time is needed before the major uptrend expected gets into full swing.
On the 3-year chart we can immediately see the one remaining major hurdle left for silver to clear before it takes off strongly higher, and that is the important downtrend line in force from the highs of April - May of last year. While it is expected to go on to vault above the resistance at this trendline before much longer, especially as we are entering the most seasonally bullish time of year for gold and silver, the current short-term overbought condition suggests that it is going to take a rest before it attempts this feat, in order for the overbought condition to unwind, and this pause is expected to synchronize with a brief dollar rebound, for reasons set out in the parallel Gold Market update. Aside from this caveat everything appears to be in place for the major uptrend expected to get underway quite soon, and it is clear that if silver does stage a clear breakout above its major downtrend line it is likely to take off like a rocket. Fundamentally, we can look to politicians to continue to play their part in the continued bullmarket in Precious Metals by continuing doing what they do best, which is to create money out of thin air, so that they can maintain their ongoing debt circus act.
Finally, I came across the following sound advice on a wall in a market in Cancun, Mexico, a few days back. For the benefit of those of you who don't understand Spanish, it reads "I buy gold and silver" - I thought "Yeah - me too!"