Two weeks ago, I wondered aloud on this forum if silver would get to $26 an ounce if gold reaches $1,900.
Well, gold did breach $1,911 but that lasted about 2 hours in all, in an epic fail of a rally many expected from the U.S. COVID-19 relief deal}}.
Gold clearly failed to get its moon shot from the near $900 billion approved in the second iteration of the U.S. Congress’ aid for the pandemic—largely because of the dollar’s rebound in the aftermath of the {{2|British pound’s crash on the new coronavirus strain detected in the U.K.
The benchmark February gold futures contract on New York’s COMEX is languishing for a second week now boxed in a $15 trading range under $1,875.
The question, of course, is what happens to silver at this point? Will it get hamstrung as well? Or will it progress on its own?
Silver's Fundamental Outlook Bodes Well For The White Metal
The popular thesis for silver is that while it’s a shiny metal that’s important for industry, its upward momentum, at least in the near term, is based on the relative outperformance of gold. It’s called gold’s “poorer cousin” for the reason that it often sinks more, and rises less, than gold.
Yet, price action and technical charts since the start of this week indicate that silver might perform relatively better to gold this time.
Following Monday’s early breakout, benchmark March silver futures on COMEX soared to $27.62, a high not seen since the week to Sept 11.
Consolidating from there, it was more than $2 lower from that peak by Tuesday’s late afternoon trade in Asia, hovering at $25.77.
Yet, with silver holding well above its 100-day Simple Moving Average of $25.16, the fundamental outlook bodes well for the metal, said Anil Panchal, a silver chartist who blogs on fxstreet.com.
He said silver needed to settle below $24.60 to again challenge November lows of under $22.
Conversely, Panchai said, the upside for silver was potentially stronger if it recaptured or returned near Monday’s peak of $27.62. He adds:
“While Relative Strength Indicator conditions may challenge the silver bullion buyer beyond $27.60, highs marked in September and August, respectively around $28.90 and $29.85, will add to the upside filters ahead of the $30.00 threshold.”
All charts courtesy: S.K. Dixit Charting
Sunil Kumar Dixit, technical analyst in precious metals at S.K. Dixit Charting in Kolkata, India, has a similarly encouraging outlook for silver:
“Every strong rally in precious metals is marked by a leading silver. Previous Day close in silver gave what appears to be a bullish engulfing candle.”
Dixit said four-hourly and daily charts for COMEX’s March silver indicated $25.40 as a strong support that would help the metal move higher.
“Stochastic RSI positivity supports the bullishness and momentum can show higher volumes taking prices to $26.40 - $26.95 - $27.20 - $27.60 - $28.10.”
“Clearing out $28.10 with volume support will confirm the FOMO (Fear of Missing Out) trade, resulting in accelerated buying frenzy with the $30 handle being the first anchor.”
But Dixit also warns that, conversely, if the $25.40 support in March silver crumbled, “any panic attack can expose silver to $24.60 and below.”
Investing.com’s own Daily Technical Indicator maintains a “Strong Buy” for March silver, with Fibonacci resistance first at $27.34, then $27.93 and later at $28.89.
Should the upside reverse, then Fibonacci support emerges first at $25.42, then $24.82 and later at $23.86. In any case, the pivot between the two is $26.34.
As with all projections, we urge you to follow the calls but temper them with fundamentals—and moderation—whenever possible.
Note: Barani Krishnan uses a range of views outside his own to bring diversity to his analysis of any market. He does not own or hold a position in the commodities or securities he writes about.