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« Have precious metals bottomed? | Main | Silver Wheaton reports record second quarter and first half 2013 production »
Friday
Aug162013

Silver Prices Bounce Back To Close at $22.98


If we take a quick look at the above chart of silver prices we can see that they have moved up for seven trading sessions. Gold prices have also made some good gains and pushed above the $1350/oz level which was a resistance point for gold. There are many explanations for this but we see it as gold’s inverse relationship with the US dollar at work. The dollar has fallen from 84 to 81 recently as the other constituents of a basket of currencies that they are compared to; the Yen, Euro and pound have been in rally mode recently.

We do need to keep one eye on the dollar as a bounce to higher ground would hinder both gold’s and silver’s progress. This could happen if the Fed perceives the economy to be ‘improving’ and therefore it is an appropriate to announce a timeline for the ‘tapering’ of the bond buying program. The next few weeks will prove to be interesting as coming up we have Labor Day, 2nd September 2013, which usually signals the start of better times for silver and gold on a seasonality basis, although some would argue that it has arrived early this year, followed by the NFP payrolls which are scheduled for 6thSeptember 2013 and then the FOMC meeting which is scheduled for 17/18th September. To taper or not to taper will be big question.

Back to the chart; we can see that the RSI has shot up to close at 76.19 which is considered by many to indicate that silver is in the overbought zone. Some traders buy when the RSI is below ‘30’ and considered to be oversold and then sell when the RSI rises above ‘70’. Technical analysis is a long way from being a perfect science and one indicator does not determine future direction as one swallow does not make a summer. However, the chart does show reversals at $50 and at $35 when the RSI was well and truly in the overbought zone, just something to take into consideration when formulating your investment strategy, even though there exceptions to every rule. On the positive side technical indicators can remain high for some time should a reversal not materialize, so take care out there.

With gold, silver and Uranium stocks being out of favor one must decide if this is a problem or an opportunity. We have steadfastly refused to buy gold and silver mining stocks for the last two years and as evidenced by the HUI we feel that our decision to hold back has been vindicated. The damage done to the mining sector may not be over yet but this demise is starting to offer up some exciting opportunities in my view.

Great care will be needed in the selection process in order to generate a reasonable profit and that’s where our new venture begins. ‘Stock Trader’ has begun trading on behalf of ourselves and our much valued subscribers, all exciting stuff which we are really looking forward to, if you wish to join us then please subscribe below;

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