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Originally published November 29th, 2009
While gold has soared in recent weeks silver has put in a plodding performance unable, thus far at least, to break above the zone of major resistance and the return line of the uptrend channel in force from late last year shown on our 2-year chart. Of course, if gold marshalls itself soon and resumes its advance then we can expect silver to overcome these restraining influences. However, if gold now reacts further, which looks likely for reasons set out in the latest Gold Market update, then silver can be expected to drop back towards the lower support line of the channel, currently in the $15.70 area.
The failure in recent weeks to "open out" the uptrend channel by advancing more strongly, which we had been looking for, means that the potentially bearish convergence remains - it is a Rising Wedge, and a breakdown from this channel, should it occur, would obviously be bearish and a sell signal. Such a development would likely follow on from a dollar upside breakout and strong advance which would be associated with another deflationary downwave developing. This scenario, which technically looks increasingly likely is discussed in the Gold Market update, which includes an analysis of the latest dollar charts.
Clive Maund
clivemaund@gmail.com
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