Silver and palladium broke up, will gold follow?

The precious metals are recapturing critical levels one after another, claiming a reversal to the upside after a two-year bearish trend. Silver made quite a move up on Monday, gaining over 4%. Palladium closed the day up 5.3%, and at one point, it was up 6%.

Silver managed to break above the 50-day moving average, which used to be an effective resistance since the beginning of the month, and made a six-week high. More positive vibes for investors are likely to come from a quick return above $20.

At current levels near $20.60, silver has approached the support area of May, which could now move into resistance. If the bulls don't fight back sufficiently here, the price could jump quite quickly to $22, the area of the rebound highs of June. This is already the critical turning point in the last eight years, where a battle between long-term investors with opposing views is about to occur.

Palladium rose on Monday to 2250, the high since May, developing the uptrend of the last two months. Confident buying pushed palladium above the 200-day average yesterday, although sellers have stepped near it over the past four months. This looks like a fundamental change for long-term investors in confirmation of the upward trend since June.

So far, silver and palladium are now showing more bullish signals, while gold remains anchored at the 50-day moving average and below the local lows of May and June. However, gold is often in slightly earlier stages of market cycles as a more liquid instrument.

Other positive leading signals for the precious metals market in general and gold include a 15% increase in VanEck Junior Miners fund price since the middle of last month and a 10% jump in Barrick Gold since the end of July with a 4% accord on Monday.

The performance of silver, palladium and gold miners points to a reversal of the two-year negative market trend. However, while it occurs in relatively narrow sections of the market, gold still should prove too steady growth of investors' demand.

A necessary confirmation of the trend reversal in gold will be a return to the area above $1800 and a continuation of bullish momentum at these levels.