This is a copy of the last update on silver sent out to subscribers at the weekend. Explanatory notes are added in italics.
Here are the numbers for this week past:
London Silver Fix Price: $17.38 (+$0.43 on week)
NYMEX Spot Price: $17.06 (-$0.12)
US Dollar Index: 76.21 (-0.61)
Silver RSI: 60.80 (-6.75) (70 overbought/30 oversold)
US Dollar RSI: 49.38 (-8.59) (70 overbought/30 oversold)
RMAR: 1.02 (+0.02) (1.30 overbought)
NYMEX SLI: 1.24 (+0.05) (1.80 overbought)
GOLD SILVER RATIO: 52.50 (-1.56) (15 overbought)
Silver 50 day moving average: $15.92 (+0.29)
Silver Velocity since bottom (16th August 2007 184 days ago): 3.08 cents
Silver velocity at same point in 2004 spike (01/12/03): 0.51 cents per day
Silver velocity at same point in 2006 spike (01/03/06): 1.66 cents per day
(The silver velocity numbers indicate how "fast" the current up leg in silver is moving compared to the last two bulls which spiked in 2004 and 2006. The average cents per day progress is shown for the same time into each bull since their corresponding breakout. Clearly this new bull move is far stronger than the previous two moves!)
As discussed last week we had a gap on the 8th which would be bullish if not filled in quickly. The gap was not filled over the subsequent week even though silver was consolidating sideways. However our suggested strong move up for the week ahead was indeed dampened by the US Dollar Index breaking its 50 day moving average. Not surprisingly (going by past form), the dollar has dropped back below its 50 dma which to me is bullish for silver.
The attached silver chart however shows the upward trend is intact and indeed has accelerated to a steeper gradient. So far that trendline is finding support at $17.00 whilst our longer term 50 day moving average offers support at just under $16.
The RMAR and SLI make progress towards their sell trigger points with 0.02 and 0.05 moves respectively on the week. As a guide to future expectations, if silver blew off to a sell point in mid-May, the RMAR and SLI on average would have to progress about 0.02 and 0.04 each week, so those are the kind of numbers we are looking for if a sell signal is to be anticipated.
So the overall trend is still intact and bullish.
A short word to close on something a few subscribers have mentioned and that is the proposed IMF sale of 400 tonnes of gold. Is it bearish for gold and by how much?
Firstly, note that the US Congress may block the proposed sale again as they did in 1999. However, that was done at a time when gold was at major low prices and further sales would have been seen as too disruptive to already suffering gold producers. With gold near $1000, they may not be so concerned about revenues of gold producers.
Secondly, if it proceeds, the sales will be staged in a manner similar to the 500 tonnes quotas of the Washington Agreement. In other words, it won't be dumped on the markets in one go and that was a specific concern that accompanies any major government gold sales. Indeed, there is an opinion that none of the gold will see public sales but be snapped up by governments who are quite prepared to shore up central bank reserves or sovereign wealth funds with some inflation proof assets.
So, the impact to me will be minimal. In fact, the markets may already be discounting these gold sales in the current price of gold which may partly explain why silver is outperforming gold and may well continue to do so.
In fact, I suspect when the auctions proceed, gold will jump in value (sell the rumour and buy the news). And remember that the Washington Agreement never put any serious brakes on the gold bull.
Finally, the less gold in government hands the better in my opinion!
Further analysis of silver can be had by going to our silver blog at http://silveranalyst.blogspot.com where readers can obtain a free issue of The Silver Analyst and learn about subscription details. Comments and questions are also invited via email to email@example.com.