August 2012 – Silver Tracks Gold Rally

Well hello Silver. In a series of moves that seems to be tracking positive signs in the price of gold, silver made some bold moves last week, driving $2 northwards and crossing over the $30 mark. Coming on the tail of several listless months bobbing up and down on the calm oceans of the Precious Metal Summer Doldrums, once again the bulls are out and the bears are skulking back in their caves. Two weeks ago we wrote about how the price of silver had crossed over its 50 Day Moving Average line and held it in a move that had not been seen for several months and portended a possible August silver rally. Well now that move has been solidified as Silver not only held it but fired upwards in the days following right up to its 50 Day Moving Average trendline on the weekly scale. And just like gold, a MACD crossover has occurred which on the weekly chart bodes well for the future.

August 2012 Silver Rally

Hubert Moolman is bullish in his latest ‘Silver Update’ in which he writes “The silver chart has formed a big pennant like that of the gold chart. What this indicates is that the silver price will likely make a massive move soon…

The technical and fundamental evidence that I have collected, and look at, tells me that the price is likely to go upward out of this pennant formation. There is a big threat of deflation, but, in my opinion, it is this very deflation (brought about by the collapse of the debt bubble) that could be driving silver prices higher.”

Silver Gearing Up for August 2012 Rally?

Hello Silver Bugs and thanks for reading this post. Well after following gold’s lead for months of drifting in the notorious ‘dead zone’ of the ‘Precious Metals Summer Doldrums’, it seems silver has finally awakened somewhat, and just in time for the seasonal precious metal rally. Last week saw silver cross back and hold a postion over its 50 Day Moving Average line, something that has not happened in almost 5 months since March 2012. The weekly chart shown below is also looking favorable. MACD, a trend-following momentum indicator that shows the relationship between two moving averages of prices, is pointing upwards suggesting positive upward price momentum over the next few weeks. This is great news as set-ups like this on the longer-term indicators are more robust. The chart also shows that silver has been nicely holding at its 150 Moving Average, a trendline we commented on regarding silver’s price action back in June 2012. The blue 50 week Moving Average line is downward sloping and overcoming this hurdle will prove to be silver’s next nemesis in the medium-term. Currently it stands at about $31.5.

Silver Price August 2012

On a more technical note, Dr.Jeff Lewis of silver-coin-investor.com writes that ‘bullion banks have recently been positioning themselves for rising silver prices, and the latest COT report shows that they are net short silver by an unusually low amount.

While these large traders may be tempted to establish new shorts at these levels, especially given the RSI-price divergence, it could eventually set up a crowded short situation that will only require a spark to start the long awaited short covering rally in silver rolling.

A short covering rally could erupt on increased speculative buying or perhaps due to managed money panic short covering. Interestingly, the latest COT report also shows that managed money traders — which include hedge funds, CTAs and other futures-trading money managers — have established the highest number of short positions in silver futures seen since 2006.

If such a rally is ultimately seen, the correctively bullish activity might well be followed by new silver longs entering the market to follow the initial upward momentum. With that noted, the ultimate question remains as to whether any short covering rallies in silver will be met with fresh selling from the large commercial banks who are ostensibly selling silver in large amounts on behalf of their customers.’

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