At first glance, silver appears to be moving in step with gold. Gold's up 11% year to date and up over 7% month to date, while silver's up 10% for the year and gaining 11% for the month.
"The silver market is showing quiet strength and major support has been defined in the $19 to $20 levels for May Silver." Commented Karl Schott, a silver specialist with the Equity Management Academy. The fundamentals have not changed and in fact have gotten stronger.
"Silver is finding its own support independent of gold due to strong buying from China and India and an increase in industrial production of electronics," including smart phones, said Eric Sprott, CEO Sprott Asset Management in a recent phone interview.
Now let's deal with some reality in the real physical gold market in 2013. As we discussed in 2013, the supply/demand data suggests to us that physical demand was overwhelmingly greater than mine supply
Figure 1: World Gold Supply and Demand 2013, in Tonnes
It is obvious to us that precious metals markets were manipulated in 2013. It is also obvious that demand far exceeded annual mine supply. Now let's analyze what should happen, going forward, with these revelations. If gold prices are back on their long-term trend, ex-manipulation, a linear progression of the gold chart from 2000 to 2014 would suggest a price of $2,100 now (62% higher than the current $1,300 level) and $2,400 by year-end (Figure 2).
Figure 2: Gold Price is far from its Long-Term Linear Trend
Source: Bloomberg and Sprott Estimates
The gold and silver markets have met and fulfilled all expectations for an upswing into the late February time frame as documented and published on Seeking Alpha.
The silver market needed a rally above 20.97 to turn The VC Price Momentum Indicator up and complete the expected initial target zone level of 22.10 documented in last weeks' report and culminate this initial advance. "The gold and silver markets have given a very powerful confirmation of the 1 to 3 month outlook for an initial bottom confirmed late December into late February. Major resistance shows up in the 1336 to 1347 area for the April futures contract. The silver major resistance shows up in the 22.10 to 22.37 levels basis the March contract."
Echoing my comments, "The market will provide us with another opportunity to get long again for those that missed the initial breakout. A close below 1322 would confirm a correction into the 1311 to 1297 areas is possible where it would offer traders/investors with another ideal buying opportunity to get long. Buy corrections and add to your long-term positions in silver as we approach the 21.44 to 21.02 levels. A close below 21.71 would confirm a possible test to the mid to low 21 area for March silver futures."
Our Live trading room subscribers exited all long positions short - term to intermediate above 22.10 for May silver. They were well informed and prepared days ahead of silver moving towards these expected levels of resistance and realized some very substantial profits. The weekly high was 22.18.
As mentioned above, the low 21.11 made on Thursday February 27, fulfilled the initial downside expectations for this correction and triggered a Buy signal at 21.20 for the May Futures Contract.
Let's take a look at silver's weekly technical picture and see if we can identify some trading opportunities.
The May Silver futures contract closed at 21.26. The market closing above the 9 day MA (20.51) is confirmation that the trend momentum is bullish. A close below the 9 MA would negate the weekly bullish short-term trend to neutral.
With the market closing below The VC Weekly Price Momentum Indicator of 21.50, it confirms that the price momentum is bearish. A close above the VC Weekly, it would negate the bearish signal to neutral.
Cover short on corrections at the 20.78 and 20.30 levels and go long on a weekly reversal stop. If long, use the 20.30 level as a Stop Close Only and Good Till Cancelled order. Look to take some profits on longs, as we reach the 21.98 and 22.70 levels during the week.
The information in the Market Commentaries was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed therein constitutes a solicitation of the purchase or sale of any futures or options contracts. Trading derivatives financial instruments and precious metals involves significant risk of loss and is not suitable for everyone. Past performance is not necessarily indicative of future results.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in AGOL, AGQ, DBS, DGL, DGLD, DGP, DGZ, DSLV, DZZ, GLD, GLDI, GLL, IAU, PHYS, SGOL, SIVR, SLV, SLVO, TBAR, UBG, UGL, UGLD, USLV, USV, ZSL over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.