Silver Market Update
Originally published October 7th, 2007.
We succeeded in sidestepping a hefty reaction in silver early last week, but while gold has already made good most of its losses of early last week, silver has not - yet, and long positions can therefore be reinstated at a better price, although some traders may prefer to wait for the "triple breakout" referred to in the Gold Market update before going long.
Much of what is written in the Gold Market update applies equally to silver, to which readers are referred. On this occasion gold may be used as a breakout indicator for silver. This is because the gold price is still trapped beneath the confines of a Distribution Dome, however, should it break out upside from the dome, as now expected due to the prospects of the dollar going into freefall, it will likely enter a period of near vertical ascent, and silver, which does not have the same clear shorter-term dome pattern, can be expected to follow suit. Therefore, silver investors and traders should watch out for a breakout by gold from its dome, and should this occur, will be entitled to expect silver to break rapidly above the resistance at last year's highs and enter into a period of rapid appreciation. Despite the substantial increase in the Commercials' short positions in silver, cited as a source of concern in last week's update, it is still nowhere near as high as that in gold. There is therefore plenty of scope for a big rise in the price of silver before the Large Spec long positions and Commercial short positions become prohibitively big.