$42+ Silver and heading higher

Daily chart of the World Silver index from late January 2011. 

At this time, the Silver market does not want to break down and pull back even after the massive rally since August 2010.
A fibonacci retracement is drawn from the low of 26.30 to the recent peak high of $36.75. The 161.8 fibonacci projection is around the $43.50 area which should provide resistence before a potential pullback is realized.
Technically Bullish
Silver has been trading above the 15 day moving average since March and is riding along the upper bollinger band.
RSI is overbought, it has been over 70 since April 4th. (How long can it stay there?)
Stochastics lost it's embedded status but the K line is heading back towards the 80 area.
It is producing higher highs and higher lows.

In early Friday morning trading (Before the NYSE open), Silver has hit $42.71. The right combination of factors to drive the Silver price higher.

• Gold Silver ratio going back to its natural level of 15/1  (Currently at 34.7)
• Industry demand with improving economy
• Investor demand
• Poor mans Gold, much easier for people to invest a few hundred dollars in Silver compared to $1475 Gold
• Worldwide demand - China, India. Inflation worries growing.
• Backwardation - Current price is higher than future prices
• Shorts getting "Squeezed"
• Silver has been outperforming Gold on a percentage basis since late August 2010 (attract more investors)

One chart to leave you with is the Silver/US Dollar ratio. (An earlier post was the US Dollar/Silver ratio, this time it is reversed)  How much of the US Dollar Index does it take to purchase one ounce of Silver.

The ratio is currently at .53 (.53 of the US Dollar Index to purchase one ounce of Silver)  I expect this ratio to hit 1:1 sometime in the future.  When and at what level is anyone's guess. I'll take a shot and state that it will be within 1 year and around the 65 level.

Silver potential pullback levels + Video

Here is video on Silver which covers the shortage, consumption, industrial demand and ratio to Gold.

The current PM markets are pulling back with the overall markets with marginal 1st quarter earnings and Japan's nuclear issues.
I know that most people do not like buying a a stock or other types of investments when it is in a decline, but if you look at all of the pullbacks in Silver since October 2008, they have all been buying opportunities.

Since Silver has been in such demand, the recent pullbacks have been very shallow with the exception of the January 2011 decline. Use a fibonacci tool to determine the pullback levels based on the current rally and you can accumulate positions at each level if you are looking to purchase more to add to your position.

Similar to the fibonacci retracement tool drawn on this chart.  While it's accuracy with the projection on pullback levels are not perfect, it is often very close.

Silver Shortage Video

Silver near term high $43.50, pullback to ?

World Silver Index, closing price of $40.61 on April 8th.

Since the start of the breakout in late August 2010, the pullbacks in Silver have not taken out the last major break low.  Silver is currently trading along the upper Bollinger band and may reach $43.50 (the Fibonacci 161.8 level) before the next pull back.  The Fibonacci on the chart is based on the last breakout low from late January of 26.30 to the high in early March of 36.75.

If Silver should reach $43.50, it may pull back to the low $38 level which would be a  50% retracement between the current low and the potential high of $43.50.  This may be the area to accumulate more Silver if your looking to add to your current position.

With the US Dollar Index in a decline, Silver may hold it's ground through the spring and summer months before the next breakout towards the upper $40's / $50.

April 7th Gold Silver

Daily chart of the World Gold Index from mid February, 2011.

Gold has broken out from the previous highs around the $1440 area and is slowly gathering momentum.

Gold is trading above the short, mid and longer term moving averages.

The MACD Histogram has crossed over the mid line and is on a ascent.

The RSI in on an uptrend.
With the start of inflation seen at the gas pump and at the supermarket, more people should recognize both Gold and Silver as the best way to retain wealth. Add in the unstable financial countries in Europe, the middle east issues and China accumulating Gold and the price should have no problem going to $1500 in the near future.

Daily chart of the World Silver Index from late February, 2011.

What can you say? The price has been on the ascent and hugging the upper bollinger band, Silver is trading above all three moving averages, the Stochastics are embedded to the upside. $40 is a few cents away...

The RSI is overbought at 90.  How long will it stay in this area is anyone's guess, but it will drop down sooner or later. There should be some major resistance at the even number of $40, but with the strong demand for the undervalued metal, a rise to the $41 or $42 area before a pullback is a possibility. 

All of the pullbacks with Silver have been shallow with the exception of January, 2011. (This was after a 80% gain in 2010)  The last break low was $33.64 and when Silver does pull back, it should not take out this low. 

Mike Maloney with a tip on when to sell precious metals

First, Silver hit another 31 year high today at $39.33 stochastics are embedded to the upside, Gold broke out of it's trading range and hit a high today of $1458. Technically, they both seem to be heading higher in the short term.

Silver at 30 year high

Daily chart of the World Silver Index for April 4th, 2011 since November 2010. Silver hit a high today of 38.62. I know that everyone that has been investing in Silver is satisfied with the performance so far this year. Silver is up about ~24.5% since the start of the year, compare that to the Gold return of about ~1%.

Technically, it is in a solid bullish formation with the price over the 15, 50 and 100 day moving averages.
Stochastics have embedded over 80. (Looks like the uptrend may continue)
The RSI is overbought at 89.  Note: The past rally has had portions of the uptrend in the overbought area for over a week span, so it may continue in the overbought area in the coming week.
Upside resistance would be the top of the Bollinger band which is 38.73, another .24 cents.

The Gold Silver ratio is dropping at a fast clip, now at 37.18. Just last August, it was at 68.24.
The RSI is oversold, how long can it run under 30?  (The longer the better for the Silver bulls)

Is this another short squeeze rally? Coupled with strong physical demand by Asian/Chinese buyers?
Are the buyers for Industry locking in their price and accumulating before Silver reaches $40?
Is $1433 an ounce for Gold too much for the small bullion investor and $37 Silver more attractive? (More ounces for the buck)

Maybe it's all of the above...  I'll continue to accumulate on pullbacks and dollar cost average on a monthly basis.

April 1st Gold

 

World Gold Index from November 2010

Seems like a glass ceiling near the $1440 level with Gold. If you look at a weekly chart over the last 9 years, you will notice a few occasions where it traded in a range for 6 months to up to a year. If there is no catalyst, Gold may be in a trading range through the summer until August/September where the seasonals start to kick in.

The RSI is in a downwards trend which suggests that a pullback may be in the near future...? If the US Dollar Index continues to remain weak, it may prop Gold up over the $1440 resistance level and onto $1500. 

Gold is averaging around 17.4% over the last 10 years and it started 2011 at $1388.  Add 17% and we have a potential ending price around the $1623 level, a $235 gain.