The last Silver Market update was bullish, but silver has performed more strongly than expected in the intervening period, and like gold, is now vulnerable to a short-term reaction, having risen into an area of strong resistance rather quickly. Most of the arguments relating to gold set out in the Gold Market update apply equally to silver, and there is thus no need to repeat them here.

Silver has slowed beneath a zone of heavy resistance in the $12 area which is reinforced by the falling 50-day moving average being about at this level. Even if it first rallies a little more, it is expected to get knocked back soon towards the support near the upper boundary of the small base that formed in June, i.e. it is likely to drop back to the $10.80 area. It will be regarded as a buy here as the upleg of the past week is viewed as the probable start of a new intermediate uptrend. As with gold, only in the event of a liquidity crunch and associated interest rate spike will the overall bullish pattern abort.