Interesting Technical Analysis on Silver & Gold courtesy of Cantor Index – looks like they agree with our bull call on silver…

2 mins. to read

The monthly graph above shows the stellar performance of Gold and Silver over the past 25 years. Silver is the OHLC prices above in Blue, Gold prices are the Gold line.

This graph is all the more extraordinary as this is on a semi-log scale. Detailing how the gains posted in recent years have kept pace with the early gains posted 2000-2007.

This graph does detail however an interesting difference between Silver and Gold in recent years. Silver came off hard into the wider market sell-off into 2008, while Gold barely retraced.

Then again from the highs in 2011 Silver has again retraced quite sharply, detailed more with the weekly graph below.

Over the Weekly timescale we can again see this out-performance by gold in times of wider market turmoil.

Both Gold and Silver prices gained sharply from the lows in 2008, to post multi year highs. The graph details how Silver has since come off over 50% from these highs, red lines, while Gold in comparison has not breached its 23.6% retracement level, not graphed. These retracements are calculated from the 2008 lows to the all time highs. Detailing how the wider market understandably turned to Gold in times of market uncertainty while Silver has been more closely linked to industrial trends.

On the Silver price we post a possible Elliott Wave count, where the moves from 2008-2012 seem to be a relatively straightforward impulse move higher, followed by an abc correction lower. This count follows the basic Elliott Wave rules where Wave 4 does not overlap with Wave 1, Wave 3 is not the shortest, and interestingly the abc correction has found support from the end of Wave 4. Which is often the case.

As a result this Wave 4 low at 26.39 is seen as pivotal for the medium term. While this level holds the outlook is positive expecting a new bullish 5 wave impulse to form in the coming quarters. Whereas a break below would suggest the correction has further to go.

Also on the graph we flag up how silver has retraced 50% of this move and how the upper 38.2% area seems to be offering resistance. Setting up a medium term trading range between the pivotal medium term support at 26.39 and the 38.2% highs at 34.11.

Drilling down to the daily charts we can see that over the recent moves Gold has just marginally under-performed, upper graph.

As Gold has moved down to the lower end of its recent trading range, red region, and has broken its 61.8% retracement levels, calculated from the May 2012 lows to the October 2012 highs, red lines. While Silver in comparison has held its comparable 61.8% level and has not posted fresh lower lows in February. Also Silver remains mid range of its comparable trading region.

We would suggest that the pivotal medium term support detailed on the weekly graph may be the cause for Silver not matching Gold lower in recent days.

Traders therefore could migrate to Silver in the near term looking at the major support level as offering decent risk/reward on buying the commodity now, looking for a near term move to the 34.12 resistance area. With any breaks above the 34.12 area seen as offering up considerable upside potential indicating the multi-year bullish trend is set to resume.

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