Can silver and gold make the break this time?
Silver has spent at least the last year trailing under a downward-sloping five-year-trend resistance line. You can see this in the monthly chart below. However, the one bright light for bulls is that the price has very clearly held above the 200-month moving average (the red line).
Perhaps more importantly we bottomed just last month at 14.86. This is just below the 200-month moving average at 15.40/30, and just above the 13-year trendline support at 14.35/14.30.
As far as I’m concerned that’s a strong bounce off very important longer-term support in the 15.40/14.30 area. In fact the last time we tested both these supports was at the start of 2015, when the price bottomed at 13.60. Within seven months we had rallied over 50% to a high of 21.10.
Bulls now have a relatively simple task. Having failed about half-a-dozen times to break through the five-year trendline resistance, they have to make this attempt count. I’m going to wait for a break above the 200-week moving average at 17.40 for our breakout confirmation and buy signal. If we manage this by the end of August, with a monthly close above 17.40, we should see a good rally throughout the winter. After the second successful test of those important support levels, I really think we can do it this time.
In the daily chart below you can see the blue and red 100 and 200-day moving averages trending sideways in the 17.05/17.00 area. So, if we can clear 17.40, we’ll have cleared those obstacles on the daily chart as well.
Spotlight on gold
Let’s now have a look at gold. The monthly chart below shows how we have been holding above a nine-year upward-sloping trendline support, but have struggled to break the five-year downward-sloping trendline resistance.
If we zoom into the weekly chart below you can see how I was completely fooled only two months ago when I thought the price had broken above that five-year trendline resistance in June. I was wrong and the price could not beat the April high of 1295/1296. Having bottomed at 1204 just a month ago, we are heading back towards that important 1295/1296 area.
More importantly, I do think we are seeing very clear confirmation of a breakout above the five-year trendline resistance. We broke above this level in the last week of July, and are now into our third or fourth week of holding above it. Bulls really do seem like they have got their act together now.
Technical Analyst & Trader
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