Silver stocks are currently hostage to gold stocks
6 December, 2004
Silver broke out strongly above the top line of the rising trend
channel that had contained the price since its May low, as expected.
This is an important development, as this line had been tempering
and moderating the advance for months but now - as long
as the price can remain above it - it is in position
to accelerate significantly, and challenge and take out last
April's high, which fits what is unfolding in gold, which is
also well placed to accelerate. Rapid and substantial gains should
follow a break above the highs around $8.40.
This breakout by silver was
expected to lead to significant gains by silver stocks, but the
effect was muted, and instead silver stocks got caught up in
Thursday's vicious shakeout in precious metals stocks, as investors
broke out in a cold sweat at the thought of the gold stocks double-topping
with their highs of last winter. Thus, it is clear that the fortunes
of silver stocks are currently hostage to what happens to gold
stocks, as is very often the case, which is why it is so important
when considering the outlook for silver stocks, to keep a close
eye on what is happening to the gold stock indices. Silver stocks
are thus expected to make significant gains when gold stocks
do, i.e. when the gold stocks indices break above their highs
of last winter, which in the case of the HUI index will require
a clear breakout above 260.
Maund is an English technical analyst, holding a diploma from
the Society of Technical Analysts, Cambridge and living
in southern Bavaria, Germany.
Visit his subscription website at clivemaund.com.[You can subscribe
No responsibility can be accepted for losses that may result
as a consequence of trading on the basis of this analysis.
© 2003-2004 CliveMaund. All Rights Reserved.
Inc Miami USA