-- Posted 14 February, 2007 | | Source: SilverSeek.com

Silver is believed to be slowly limbering up to take out the resistance at and towards last year’s highs, an event that can be expected to lead to a major advance. However, shorter-term the picture is not so bright.

 

On the 1-year chart we can see how silver has made steady, measured progress within an uptrend that began after the December and early January sell off. This uptrend has brought the price back up to the broad zone of heavy resistance between about $13.50 and last year’s highs around $15. As we can see on the 1-year chart, periods of gradual ascent have in the past been followed by severe, if short-lived reactions, and after a 5-week gradual uptrend back into the zone of heavy resistance, the risk of another such sharp reaction is clearly increasing. The lack of dynamism on this advance is not liked and is viewed as increasing the risk of a short-term reaction. Silver could still break higher here, and may even gather the momentum to break clear above last year’s highs, but it is viewed as more likely that it will react first, probably back to the dotted uptrend line shown, an event that would be expected to synchronize with gold retreating back to support at its third fanline currently at about $635.

It is the dollar that holds the key to what happens next. The standoff in the dollar that has been going on for weeks, described in the Gold Market update, is due to be resolved soon, and the way the dollar breaks out will determine the immediate fate of gold and silver.

 

The long-term 6-year silver chart suggests that silver will likely need more time before it can break to new highs, but that any reaction from here is unlikely to be deep and can be expected to be followed by sideways trading within a relatively narrow range before the upside breakout occurs.

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