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Gold and Silver: Readying For The Next Phase

Gold and silver are up significantly since start of the year signalling that the probabilities have strongly shifted to the bullish side of the market. A breakout is imminent in a market that loves to leave people behind

by Jon Salmon, EVR Bullion Limited (UK)

In my last article I said that Gold and Silver had come a long way in 2016. Not only did the metals end the year significantly higher than when they started, but for the first time in many years, had broken their long-term downtrends. The trend is your friend until it bends, as the saying goes and despite the deep correction towards the end of the year, the saying was valid.

 

As you can see in the charts below, both have made impressive gains in a relatively short amount of time and then maintained a high and tight consolidation since then. This action has been very bullish and hints at markets preparing for further moves higher in the coming weeks.

[Current Yearly Gold Chart 20-01-2017]

 

What's happening in Gold?

Gold reached the $1,240 - $1,248 resistance level, a rise of 7.5% since the beginning of the year. It took a brief pause last week, consolidating just below $1,248 without much of a pullback. Whilst we could always pullback further, so long as Gold stays above $1,180, I believe this market is setting up a bullish breakout posture. Because the corrective action to date has been shallow and controlled, it's suggestive that Gold may be looking to move higher in the coming weeks. If Gold takes out $1,248, it could be setting up to move to the $1,320 level quite quickly.

[Current Yearly Silver Chart 20-01-2017]

 

What's happening in Silver?

While Gold rose 7.5%, silver has lead the complex rising 13% over the same period. The $17.85 proved to be a key level as it was tested numerous times before silver pushed through last week and since used this level as support. As long as silver remains above $17.50, the market is setting up a bullish posture. A breakout above current resistance at $18.20 could send silver towards the $19 level and ultimately last year's high near $21. Like with gold, whilst we can't rule out a further pullback towards $17.50, the pullbacks to date have been very shallow and when silver is truly bullish it often does not allow for much of pullbacks. However, as long as Gold and Silver remain above the highlighted support zones, they look to be setting up a strong move higher.


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