Silver Market Update

By: Clive Maund | Tue, Nov 22, 2005
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The fact that silver has already broken out to new highs in some currencies is a strong indication that it is about to do the same against the US dollar. Last week silver broke to a new high against the British Pound and although it had broken out to new high against the Yen early in October, it was not by a decisive margin, however, that changed with last week's strong advance. What this means is that we can expect to see a breakout to a new high against the US dollar shortly, and the interesting thing is that this is likely to happen whether the dollar is strong or not. Of course, if the dollar suddenly weakens, it can be expected to amplify the move.

In this update we are going to look at silver charted against various currencies. But first we will quickly review the chart for silver in US dollars. A 5-year timeframe will be used for all the charts, as this shows the bull market in its entirety, and enables us to overview the big 18-month consolidation pattern in silver on the charts.

The 5-year chart for silver in US dollars shows that silver is now in position to have a go at taking out the key resistance in the $8 - $8.40 zone, and appears to be in the process of doing just that. As already stated, silver's recent performance against other currencies suggests that a breakout against the US dollar is only a matter of time, and likely not much time.

The chart for silver against the Swiss Franc is rather similar, with silver challenging its April 04 high, the main difference being the more pronounced strengthening against the Swiss Franc in recent months.

The chart for silver against the British Pound is very encouraging as last week it broke strongly to a new high.

Against the Japanese Yen, silver had actually broken out to new high back at the start of October, however it was not by a convincing margin. This changed last week with silver advancing well above the 18-month trading range to a clear new high.

Conclusion: silver has already broken out from its large 18-month trading range against a number of currencies, signalling the start of a new intermediate uptrend. This action against other currencies indicates that a similar breakout against the US dollar is only a matter of time, and likely not much. This breakout against the US dollar can be expected to occur whether the dollar continues to advance or not, although with the dollar vulnerable to some sort of reaction following recent strength, the "ball could be kicked downhill", as a reaction by the dollar will make a breakout by silver on the US dollar chart that much easier.

With the XAU Philadelphia Gold and Silver index now breaking out from a 2-year trading range, it seems perfectly reasonable to expect silver stocks to start advancing in earnest shortly, particularly the large and mid-caps. Therefore this is believed to be a good time to get into these stocks.



Clive Maund

Author: Clive Maund

Clive Maund,

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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