-- Posted 27 January, 2008 | | Discuss This Article - Comments: Source: SilverSeek.com

originally published January 26th, 2008

With silver currently moving almost in lockstep with gold, it is clear that many of the bullish arguments for gold apply equally well to silver, so they will not be repeated here. Rather, after a brief review of recent action on the 6-month silver chart, we will look once again at the inspiring long-term chart for silver, on which we can determine a target for a strong silver advance, which will help in determining when gold will next top out, as even though silver is likely to advance strongly as gold’s advance is decelerating, they should both top out more or less together, as usual.

 

On the 6-month chart we can see how silver plunged intraday on Tuesday, along with just about everything else, only to close near the high for the day, leaving behind a fine strongly bullish hammer on the chart. Since that day of panic and recovery it has crept still higher, and yesterday tested the resistance at the pre-panic highs. Given that it has risen by about $1.25 from its Tuesday intraday low, and that it is still overbought following its strong run from mid-December, as made clear by the MACD indicator at the bottom of the chart, a near-term reaction back from the resistance at the highs looks likely next week ahead of an advance to new highs. Thus it is considered probable that it will react back to the $15.80 - $16.00 area short-term, with any such reaction being viewed as a buying opportunity.

 

On the long-term 8-year chart we can see that silver is now just breaking out from a massive 20-month consolidation pattern to embark on another major uptrend. If it follows a similar trajectory to the powerful 2005 - 2006 uptrend, which is actually a modest expectation given the fundamental background, then $28 - $30 may be attained within 6 months or so.

 

The reason for silver seemingly having trouble rising away from its long consolidation pattern is quickly made clear by glancing at a chart for the same 8-year timeframe of silver plotted against the Euro, where it can be seen that silver has yet to break out in Euros. Thus, it is should be clear that once silver breaks out against the Euro, and against other important currencies such as the Swiss Franc, the advance can be expected to accelerate dramatically.

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