Silver Market Update
Originally published December 13th, 2006.
Silver continues to look substantially stronger than gold, having put in a much better performance since it broke out from its large triangle pattern late in October, this outperformance being presaged by silver's triangle being upwardly skewed compared to gold's. Silver has broken above its early September highs, while gold has failed to break above its July highs and its lower August highs, and silver has come quite close to challenging its April - May peaks, which gold is a long way from doing. This strength is also reflected in the fact that silver has remained within a parallel uptrend channel and has lost little of its late November gains this month, while gold has lost the lot. The obvious conclusion to be drawn from this is that Precious Metals investors should be more heavily weighted in silver, at least until this disparity shows signs of closing up.
We can see all of the above on the 1-year silver chart, and also that following good gains in mid-late November, silver has had a mild reaction back towards the lower channel line of its intermediate uptrend, which has served to unwind the overbought condition somewhat. From here it is expected to make another run at the overhead resistance at the April - May highs, although traders should stand aside in the event of the uptrend channel failing, which may create the opportunity to re-enter later at better prices.