Giles Coghlan LLB, Lth, MA
Financial Source
The potential for gold upside has been well discussed over recent days, but silver is also worth a look as there are some easy technicals to measure risk with and a similar fundamental story.
The main driver behind gold is also behind silver
Gold’s key appeal at the moment is as an inflation hedge. If central banks around the world are forced to raise interest rates to counter rising inflation then they also run the risk of slowing growth. This is the stagflationary environment that is perfect for gold to thrive in. Silver will also be lifted along with gold. The key markets to look at are real yields and the dollar, The perfect scenario for both gold and silver is when real yields and the USD both fall together. If we see this environment emerge then this should give both gold and silver a double drive higher. Watch out for this situation developing as it pays to be on top of this. Note how gold has been grinding higher despite the dollar strength for much of this week? This lets us see how strong the underlying fundamentals are. A big turnaround in the USD and yields should be rocket fuel for the precious metals.
Nice technical pattern
There is a simple head and shoulder’s pattern on the daily chart for silver which clearly indicates that higher prices may be ahead. If you take a look at the chart below you can see the obvious extension of the target up into overhead resistance.
Seasonal pattern
As with gold the really prime part of the year is from December end into mid-February. However, silver can still have a decent run at this time of year and with the fundamentals strong alongside a decent technical pattern it is worth being aware of.
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