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Gold has understandably being grabbing a few headlines this year. Today’s price spike saw it trade up to its highest level since February 2015 and it is currently up over 20% since its December lows.

Silver is also showing signs of life. It shot higher earlier today and is back up around the highs it hit last month. At current levels silver is up around 15% from its December low. So its gains haven’t been quite so spectacular as gold’s. But one thing about silver is that it can really move when it wants to and its intra-day price ranges can be quite terrifying at times.

This can make it a bit of a problem for conservative traders, especially ones who look at its low price relative to gold and feel it could be a safer trading alternative. Unfortunately it isn’t.

The chart below shows silver with a Fibonacci Retracement drawn on from the October high to December low. There’s some resistance around $15.70 – the 76.4% retracement of the move. A break above here suggests a test of October’s high is on the cards. The study below is the Average True Range which indicates volatility. It has picked up recently but still relatively subdued.
  



  
This is even more apparent when looking at a longer-term chart which includes the high from 2011.
 

    
If gold continues to rally then silver should go with it, and its upside potential could be much greater in percentage terms. But it is certainly not a trade to tuck away and forget about. The intra-day moves are just too fierce. It is also an industrial as well as a precious metal. This can often work in its favour. But it could hold it back in the current economic climate as fears over the outlook for global growth refuse to go away.


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Spread Co is an execution only service provider. The material on this page is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by Spread Co Ltd or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

 

Posted by David Morrison

Tagged: Bulletin PM

Category: PM Bulletin


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