Originally published July 26th, 2009.

Although silver moves very much in lockstep with gold, it is looking considerably stronger than gold at this point. The reason for this is its role as an industrial commodity - when the stockmarket is high and rising, as now, silver usually outperforms gold, but once the stockmarket turns, silver then underperforms.

On its 6-month chart we can see that silver currently looks more robust than gold and as of the end of last week, its steep uptrend from its early July lows remained unbroken, unlike gold, but clearly should gold now turn lower it will take silver down with it of course, and this would be a logical point for it to go into reverse, having risen into a zone of significant resistance. However, silver is not overbought as measured by short-term oscillators and still has substantial upside potential, and should gold make a run at its highs over the short-term, as looks possible, silver might make advance to the zone of heavy resistance at and above $16 again. The key point to keep in mind though is that as gold has little chance of breaking out to new highs on account of its unfavorable COT structure, silver is unlikely to make it above $16 in the near future.

A curious anomaly existing at this time is that while the gold COT is looking increasingly bearish, silver's is still looking modestly bullish. While this won't save silver if gold caves in, it does suggest that any reaction in the near future is unlikely to be serious as would otherwise be the case.