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The Outlook for Silver Remains Very Bullish

James Turk
By James Turk / November 14, 2010

November 14, 2010 – Silver’s short-term uptrend remains intact, notwithstanding silver’s big price drop on Friday. The fundamental factors driving silver higher have not changed. The outlook for silver remains very bullish.

There has been no damage to silver’s technical condition. For example, silver is above its 21-day moving average. Also, silver remains well above $25, its last major resistance level. More importantly, the price drop at the end of the week occurred with bullish sentiment taking a nosedive. These conditions bode well for silver’s short-term outlook, as does the following chart.

The above chart will be familiar because it is the one I used on King World News on October 28 to forecast a $30 silver price in less than 18 trading days.  Silver closed that day at $23.871.  On November 9, only 8 trading days later, it reached $29.342 – nearly hitting my target.  The good news is that my reading of the above chart indicates that silver might yet reach $30 within my 18-day target, i.e, November 23.

Note the new pattern silver has formed.  It is a pennant, and these have the same features as the flag pattern upon which I based my $30 forecast.  Both are continuation patterns within uptrends.  They allow for a short-term consolidation, mainly to work-off some bullish sentiment, which accurately describes what happened in silver as this pennant formed over the past few days.  A pennant pattern typically ends with an upside breakout.

My expectation therefore, is that silver will break out of this pennant to the upside, and probably early this week.  The demand for physical silver remains very strong, and it is the demand for physical silver, and not paper-silver, that ultimately determines the silver price.

Most trading in physical silver takes place in London and Zurich.  The weakness on Friday occurred after both of these centers had closed.  That means that prices were driven down in the paper market.  We have seen these late Friday raids to ‘paint the tape’ many times over the past decade, so this latest one should not be a surprise.  But what is indeed a surprise to me is that the silver shorts would try this gambit now when the physical market is so tight.  Lower prices will only heighten the demand for physical metal.  Thus, I expect the silver price to rebound sharply this week.

For my specific trading recommendations, see Trading.

About the author

James Turk

James Turk is founder and chairman of GoldMoney, which provides a convenient and economical way to buy and sell gold, silver and platinum online using the digital gold currency for which he was awarded four US patents. He has specialized in international banking, finance and investments since graduating in 1969 from George Washington University with a B.A. degree in International Economics. He began his business career with The Chase Manhattan Bank (now J.P. Morgan Chase), which included assignments in Thailand, the Philippines and Hong Kong. In 1980 he joined the private investment and trading company of a prominent precious metals trader. He moved to the United Arab Emirates in December 1983 to be appointed Manager of the Commodity Department of the Abu Dhabi Investment Authority, a position he held until resigning in 1987 to begin FGMR.

James Turk has written several monographs on money and banking and is the co-author of The Coming Collapse of the Dollar (Doubleday, 2004), now available in a paperback version entitled The Collapse of the Dollar

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