The silver chart looks considerably less inspiring than the gold chart at this juncture, which is perhaps not so surprising as after outperforming gold last year, it has been underperforming it so far this year. On the 10-year chart the trading range that has followed the ramp from September 2005 through April last year does not look to be of sufficient duration to support another strong advance, and the uptrend channel drawn on this chart looks unsustainably steep and for these reasons the chances of a breakdown are considered to be quite high.

The situation is complicated by the Iran factor, for if an attack on Iran occurs soon, both gold and silver would be expected to break strongly higher and they are certainly in position to do so. Oil has already broken higher last week from a Head-and-Shoulders bottom, as we have observed in the Oil Market update, although there is still the chance that this was a false breakout.

On the 2-year chart we can see that silver is now in a critical technical situation - it must break above last year's highs soon to avoid the risk of breaking down from the uptrend channel shown. Observe that if it does break down here it will quickly take out both its 200-day and 300-day moving averages which would not be good news. Such a development would be expected to at least result in the price "retiring" into a much more drawn out consolidation pattern, and at worst it would signify the completion of a top area.

Traders can remain long here for a possible upside breakout, but should bail immediately if it breaks below the 2 trendlines shown, as this may lead to a plunge, a routine event with silver, as it tends to go down a lot faster than it goes up. The creeping advance during March just above the trendline, following the plungelet at the start of the month does not give grounds for confidence - it needs to get away from this zone quickly as it is in danger of getting slammed here.