All that Glitters is Silver

In the week gone by, we saw a good move come through in Silver. So what is it that happened? Silver moved closer to its resistance of 73,900 and as can be seen from the chart below, is not far from its breakout point. On two occasions in the recent past, the price hasn't been successful in absorbing the overhead supply.

The indicator is close to bullish momentum territory and does seem like it's catching a bid. What would it take to initiate a buy signal in silver? Nothing less than a breakout above 73,900.

In the event that we do witness a breakout, the risk management level will be 73,900 with a target close to 99,500.

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Gold on the other hand has made only a little progress, but that too is important. We saw the price respect its support level of 44,550 and bounce back from those levels. The last time that we saw the indicator get that close to bearish momentum territory (in 2016), the price bounced back immediately and then progressed higher.

We're still waiting to see if this particular pull-back holds its ground and finds its groove. We'd like to see the yellow metal take out those all-time highs.

We are bullish above the level of 56,840 with a target near 76,700.

Now let's take a look at Silver vs. Gold. What we see here is that the ratio is making higher highs and higher lows. This alludes to Silver outperforming Gold.

In a scenario where all precious metals are underperforming, it becomes easy to short them and wait for the target. But this ratio right here was telling us that there's more here than meets the eye.

Notice the peak made by the ratio in 2020, when both Silver and Gold clocked new all-time highs. Now notice where we are today - far above the swing high of 2020! That is a positive. Despite both the metals consolidating or correcting, this particular ratio continued to churn higher, thereby signaling an inherent strength.

This is the power of relative strength analysis. It gives us a perspective that price charts all by themselves may not! A breakout above the ratio's current overhead resistance may come through if Silver continues to shine.

So if gold begins to rally, should we expect the Equity market to correct or consolidate?

Certain sections of the market believe that both Gold and Equities cannot rally at the same time. Granted that Gold is a safe haven and is definitely more in demand in a risk-off scenario, but to say that the two -- Equities and gold -- move in opposite directions is far from the truth.

Take a look at the chart below:

When you look at the big picture, you realize that for the most part, both these lines above have been moving in the same direction, save for a couple of occasions. As the stocks rallied, so did Gold.

The bottom line is that a higher projection for Precious Metals does not equal to a lower projection for Equities.

We're tracking the precious metals to see if they participate in the ongoing Base Metals rally. Wouldn't that be a powerful Commodity supercycle?

What are your views on precious metals? Share your thoughts with us. We'd be happy to hear from you.

Allstarcharts Team