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An important reversal has now
completed in silver and it is in the early stages of what promises to be a
powerful uptrend that should take it comfortably to new highs.
On its 7-month chart we can see how just over a week
ago it broke out from its small Head-and-Shoulders bottom, an event which we
had anticipated, having oberved it stealthily
breaking out from its bullish Falling Wedge downtrend simply by trading
sideways for a number of days, which observation was put to good use by us
piling into silver bull ETFs just ahead of the H&S breakout. This past
week, emboldened by gold's important breakout and robust action in PM stocks,
silver has followed up by advancing through the resistance level shown,
although given that it is now becoming substantially overbought short-term,
as shown by its RSI indicator, it would not be surprising to see it drop back
temporarily beneath this resistance again. Overall, however, the picture has
become strongly positive, so it may do no more than pause briefly before
continuing still higher.
 
The long-term charts for silver are much more chaotic than those for gold,
where we have very well defined inner and outer trend channels since the 2008
lows, which gold has adhered to with an almost religious zeal. The best
channel fit we can find for silver is shown on the 5-year chart below - if
anyone knows of a better one, drop me a line - I'll be interested to see it.
If this channel is correct, or close to correct, and common sense dictates
that it is, then the prospects for silver are very good here, as it is likely
to advance towards either of the upper channel return lines shown on the
chart, which would certainly result in handsome gains from the current price,
and such an advance would be congruent with the bullish outlook for gold set
out in the parallel Gold Market update.
The fundamental reasons for the suddenly rosy outlook for Precious Metals, and
commodities generally, are set out briefly in the Gold Market update, and for
ease of reference, the relevant paragraph is repeated below...
In this modern age of market manipulation and
meddling, politicians are not prepared to give the forces of capitalism free
rein to do their necessary work of straightening out distortions, since that conflicts with their agenda. Thus, instead of letting
European banks collapse, the Fed has decided to rescue them with "back
door" QE dressed up as swaps etc - the reason
is, as you might expect, not altruistic - if the European banks collapse,
they will drag down the US banks, and as the US banks are the Fed's masters
and the bosses of the entire system, that cannot be allowed to happen,
whatever the cost elsewhere. That is why the markets are rallying again
across a broad front and why the outlook for gold and silver, and commodities
generally, is once again bright, for the European bailout means money
creation - and inflation.
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