Don’t Look Now But Silver Could Be Breaking Out To The Upside

Don’t Look Now But Silver Could Be Breaking Out To The Upside
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The price of gold has been moving higher making higher lows and higher highs since mid-August when it fell to its bottom for the year at $1161.40 per ounce. Gold dropped to the lows of 2018 on the back of a new high in the dollar index. Since then, the dollar rose to higher highs, but gold did not respond with a new low. Instead, it continued to make its way higher which was a sign of strength for the yellow metal.

Gold and silver tend to move together over time as they are both precious metals and attract buying or selling under similar market conditions. However, silver waited until mid-November to reach its low for 2018 when it fell to $13.86 per ounce. Critical technical support on a longer-term basis is at the December 2015 in both the gold and silver markets. At that time, the price of gold found a bottom at $1046.20, and the 2018 low was $115.20 or 11% above that level. Silver came a lot closer to its support level as the December 2015 bottom was at $13.635. The low in 2018 at $13.86 came within 22.5 cents or 1.65% of the 2015 bottom.

Silver is a metal that tends to move more than gold on a percentage basis over time, so it attracts more speculative activity. Silver’s penchant for price volatility often leads the metal to overshoot technical targets on both the up and downside. After a failed attempt to challenge the technical support level, silver returned to its trading range which was between $14 and $15 per ounce. The band had been in place since August of this year. Aside from a few failed attempts below $14 and above $15, silver traded within its range.

Over recent weeks, the price of gold has been moving higher on the back of increasing volatility in markets across all asset classes. The price action in the gold market did not result in a break to the upside in the silver market above its technical resistance level. However, on the day after the Christmas holiday when the market was watching huge recoveries in the price of crude oil and stocks, silver quietly moved above its technical resistance at the $15 per ounce level. 

Source: CQG

As the chart highlights, silver moved above $15 on December 26 and rose to a high at $15.25, the highest price for the precious metal since August 15.  Gold also rose to a new and higher high at $1282.30 on Wednesday which was its highest price since July 9.

The next level of technical resistance for the silver market stands at $15.85, the early July peak. Time will tell if the break to the upside in the silver market is the beginning of a new bullish trend or another failed breakout above a significant technical level.

With all of the action in markets across almost all asset classes on December 26, silver quietly moved to a new and higher short-term high. Volatility has returned to the precious metals sector, and it could be a harbinger for wider trading ranges and new trends as we head into 2019.

 

 

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