After looking set to challenge its highs silver turned abruptly lower and has fallen substantially over the past couple of weeks for the same reasons as gold, namely collateral damage resulting resulting from the rally in the broad stockmarket as crisis fears eased after the Fannie and Freddie bailout and the falling price of oil.
As usual, the arguments set out in the Gold Market update apply equally well to silver and we will here detail the differences. One significant difference is that the silver price had started to rise from a much shallower bowl pattern than that evident on the gold chart, and whereas gold broke down from its bowl pattern last week, if silver did the break was only marginal, as we can see on its 1-year chart. The main point to make about the silver chart is that it continues to look bullish, with strong underlying support and positively aligned moving averages.
In the Gold Market update it was pointed out that gold may mark out a "handle" to complete a "Bowl (cup) and Handle" pattern, a process that could take some weeks before gold is ready to challenge its highs, although it could happen alot sooner. If this is the case it clearly implies that silver will spend the same time rangebound between the resistance at $19.50 and the support at and not far below the current level before it is in position to challenge its highs. With a weaker dollar and continuing and possibly worsening inflation inprospect worldwide, the bullish case for Precious Metals remains unchanged and therefore silver is regarded as a buy at current levels and on any further short-term weakness, which is likely to be limited due to the strength of nearby support.
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