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Silver Market Update

Originally published September 1st, 2014.

Bearing in mind what is written in the introductory paragraphs of the Gold Market update, which is equally applicable to silver, we will start by observing that silver appears to be on the point of turning up.

On its long-term 15-year chart we can see that silver is at an excellent point to begin a massive upleg, as it is currently in a zone of strong support after its 3-year long reaction and just above its major long-term uptrend line. If the next major upleg takes it to the top of the giant uptrend shown, we are looking at it rising to about $100 an ounce. Could it instead crash the support level and plunge? - anything is possible but as with gold this would only be expected to occur against the background of a dramatic easing of geopolitical tensions and a deflationary implosion, both of which look unlikely at this point.

Silver 15-Year Chart

The 4-year chart for silver looks pretty grim, it has to be said, with the congestion pattern of the past year approximating to a bearish Descending Triangle, but this should be viewed in the context of the much more positive picture on the 15-year chart. A point worth noting here is that if silver does break higher soon, we could see a really explosive rally, precisely because it has looked so awful on short and medium-term charts. One possibility is a brief breach of support at last year's lows and a drop to the trendline shown on the 15-year chart, followed by a violent reversal to the upside after stops below the support have been triggered.

Silver 4-Year Chart

The main reason for the 1-year chart below is to enable direct comparison with the COT chart for silver shown immediately below it, which goes back about a year.

Silver 1-Year Chart

Silver COT

We have seen a marked improvement in silver's COT over the past month or so, and while there is still room for further improvement, it has certainly eased sufficiently to permit renewed advance.

On the 6-month chart there are tentative signs that silver is about to break out of its recent downtrend and take off strongly higher. In recent trading days we have seen a couple of pronounced bullish "inverted hammers" on good volume, but the price has not quite broken out of the downtrend. When these occur in this position, the intraday rise clears out overhanging supply ahead of an advance, so they are often the prelude to a strong advance.

Silver 6-Month Chart

Last but not least, September is the most bullish month of the year for silver, on a seasonal basis, and while this is a background influence it is quite a strong one...

Silver Seasonality 1973-2011 Chart

The following more precise silver seasonal chart shows that the time for it to take off higher, seasonally speaking, is RIGHT NOW...

Silver Seasonality 1964-2003 Chart

 

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