Both the price of gold and the price of silver have been in consolidation pauses within a bigger bull trend since the end of July. Gold and mining stock ETF’s such as the GDX both tested their 50-day moving averages last week and rallied hard on Friday. Silver though has yet to test its 50-day moving average.
Silver is actually performing better than gold is at the moment and is poised to now breakout and run big BEFORE gold does out of this consolidation phase. Take a look at the chart of silver and I’ll show you why.
Notice the 20-day Bollinger Bands. These are the two pink lines on the chart in which the price trades in between. During consolidations these bands tend to come together and then expand once the consolidation ends and a new move up begins. You can see how this happened in May and in late June before silver ran from $18 to over $30 in July.
Now the bands are getting closer together again and will be super tight together by the end of this week. The bands for silver are closer together than they are for gold to suggest that silver is likely to breakout and rally before gold does. Even if gold takes several weeks before it makes a new high, silver can start to rally first.
Some mining stocks already are regardless going up of the metals. My stock pick of the month for August made a new high last week and Aftermath Silver is looking good with silver lined up like this too after it announced a new giant property acquisition this month.
This will be an interesting week for the metals, mining stocks, and some of the currencies too, but silver bulls in particular should see the start of a new move to look forward to in September.
As for the stock market the 20-day Bollinger Bands on the Russell 2000 are already close together squeezing.
This suggests that now small caps are likely to help provide fuel for the stock market in the short-term. Notice the IWM 20-day Bollinger Bands last came together in July right as IWM hit its 50-day moving average.
-Mike
