Silver/Gold Technical Outlook:
- Gold out big-picture wedge, looking bullish
- Silver stuck at top of wedge, breakout could be coming
- Silver might actually start to outperform gold for a while
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Gold price leading, but that could change…
A couple of weeks back gold price exploded out of a large wedge to highs not seen in six years, which has bullion looking bullish for the foreseeable future as long as any correction it has doesn’t lead to a drop back inside the wedge.
Looking at the size of the wedge it could be a pretty sizable move, somewhere to the upper-half of the 1600s is a reasonable expectation (if not higher). The breakout, though, has left silver even further behind than it already was. The gold/silver ratio has been rallying since 2011, when precious metals topped, trading at the best levels since the early 90s. But the ratio may be getting near a point of topping, at least temporarily.
Gold Price Weekly Chart (strong wedge-break)
Gold/Silver Ratio (at highs from early 90s)
Chart provided by analyst Justin McQueen
Turning to silver, we see it is still stuck in a wedge on the weekly time-frame, that while not as broad as gold, could lead to a pretty sizable breakout. And soon. A breakout in silver may be the spark it needs to also get into gear against gold and start taking back some of the underperformance versus its sibling.
But even if doesn’t outperform gold, silver could get a strong bid. The depth of silver’s wedge points to a measured move target (MMT) in the 22s. With that said, from a tactical standpoint, it is currently trading at the top of the wedge and as such not a good risk/reward buy at resistance. Get outside the wedge and the bias changes, with the first line of resistance arriving by way of the 2003 trend-line and then the top of the wedge in the 21s, followed by the MMT.
Check out the IG Client Sentiment page to see how changes in trader positioning can help signal the next price move in gold and other major markets and currencies.
Silver Price Weekly Chart (trading at top of wedge)
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX