Silver trying to follow gold

silver weekly chartIt’s always interesting to consider gold’s celestial twin, namely silver, and whilst this is an industrial metal and is often considered a bellwether of the economy in the same way as copper, silver also has the function of offering a lower cost investment metal and therefore tends to correlate with the price movements in its more illustrious partner. But the weekly chart for the metal has some discrepancies and is perhaps diverging from gold in respect of the volume.

If we consider last week’s price action, whilst both gold and silver fell before recovering strongly, note the volume associated with the price action. Here it is average, and certainly not as high as we might expect for such as sharp reversal. Nevertheless, we also have two key support levels as denoted with the accumulation and distribution indicator. The first of these came into play last week at the $17 per ounce level and denoted with the blue dashed line which is well defined. This is a feature of the indicator which displays levels which have been tested repeatedly resulting in ever thicker lines. Each time a level is tested and holds, the line increases in thickness so giving an instant view of stronger and weaker areas of support or resistance. This is clearly a strong level which held last week and so becomes stronger. A second level denoted in red is also in play this week in the $17.60 per ounce area, and helping to support the metal at this price, with a further region above at $18.20 per ounce which is currently acting as resistance and likely to come into play in due course. And if the $18.20 level is taken out, there is a further reason for silver to rally, and this is shown on the volume point of control histogram where the price would enter a low volume node which would take silver through to $19.70 per ounce and beyond. Note also how the trend monitor has transitioned from the bearish trend and is now supporting the bullish sentiment evident for both gold and silver, and provided we see an increase in volume in a rising market, and a breach of $18.20 per ounce, then we should see some further upward momentum for silver in due course.