On Friday, we wrote on silver, highlighting the metal’s breakout above a key technical level. That made us wonder two things.
First: Was silver about to embark on a major rally? Well, the grey metal has indeed extended its gains and while it may be early days, this could potentially be the beginning of a sizeable rally.
Second, we wondered whether silver’s breakout implied gold would follow suit. Judging by today’s price action, it certainly seems that way with the yellow metal finally breaking above a key technical level circa $1480/81. So it, too, looks bullish for now.
With gold and silver breaking out, the key question is this: Can these precious metals sustain their moves given the still-rallying equity markets? After all, the conventional wisdom is that rising stock prices should be reducing demand for haven metals. However, I think it is no impossible for gold to rally even in this market environment, for these reasons:
Indeed, gold has broken above the pivotal $1480/81 level today, which means the path of least resistance is now to the upside again. As well as horizontal resistance, this level marks the resistance trend of the falling wedge pattern, a bullish continuation formation that has been in place since the metal topped out in September. Thus, for as long we remain above $1481, gold bulls should be happy to pick the dips.
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