By Greg Holden – The summer of weak price movements for precious metals is now fully underway and investors are watching as the price of gold and silver are trading sideways. This price action has a long history. For one reason or another, the price of precious metals has usually flattened throughout the months of June, July and August, and then shot back up prior to the holiday shopping seasons, which begin to build momentum around mid-October.
Our technical charts on silver tell this story quite nicely. We see that the sharply rising value came to an end about two months ago, and has been range trading widely between $17.20 and $19.50 an ounce ever since.
The expectation among many analysts seems to be that silver should continue trading in the $17s through the month of August. This flat trading behavior may then start to die out towards September when the steadily rising prices we’ve seen among the precious metals markets these past two years continues with full force.
A ray of sunshine for investors, however, is the predictable bouncing behavior we should see in silver prices for the next month or so. I’d expect to see silver bouncing against the $17.20 price mark at least one or two more times before continuing a strong uptrend heading into the global holiday shopping season. Entry orders for long positions around that price are to be expected; I would be surprised to see a major breach below that point as a result.
Let’s take a quick look at the chart to see what I’m talking about. Below is the daily chart of silver provided by ForexYard. I’ve drawn Fibonacci retracement lines over the chart to illustrate the support and resistance levels relevant.
It’s clear that at the 50% retracement level we have a very solid support line which has repeatedly been tested these past two months. This line is also on the price of $17.20 an ounce which, as mentioned earlier, represents the lower border of our range-trading trend.
As such, I’d expect investors to feel excited that silver, while not the highest priority for many commodity investors, is actually an investment opportunity of great value. It’s not every day we get such beautiful entry points!
Silver – Daily Chart
Forex Market Analysis provided by Forex Yard.
© 2006 by FxYard Ltd
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