XAG/USD Breaks Out, Can Bulls Drive Rally?

Silver Talking Points:

  • Silver prices put in a strong bullish breakout this morning, jumping up to a fresh two-week-high before prices began pulling back.
  • There’ve been some interesting ideas around Silver circling on social media on the heels of the Gamestop and AMC scenarios. Might something similar be afoot in Silver?
  • Do you want to learn more about Global Macro? DailyFX Education has launched a new sub-module of content on the topic, focusing on major economies in North America, Asia and Europe. Click here to check out DailyFX Education.

Silver prices jumped up to a fresh two-week-high this morning, showing stark divergence with Gold prices that remain pinned back by resistance. As looked at yesterday ahead of the FOMC rate decision, Gold prices remain in a longer-term case of digestion, but Silver prices have started to show greater resiliency with a touch of additional strength.

This morning’s move brought upon a quick topside breakout after the US opened for business, with prices hurriedly pushing up to the 27.00 level before sellers came into offer supply. That psychological level currently helps to mark resistance.

To learn more about how rounded whole levels can function as support/resistance, check out DailyFX Education

Silver Four-Hour Price Chart

Chart prepared by James Stanley; Silver on Tradingview

On that topic of greater resiliency from what’s been recently seen in Gold, the Gold/Silver ratio is nearing what could be a significant break below the 70.00 level. From the monthly chart below, you can see how the Gold/Silver ratio hasn’t seen extended activity below the 70.00 level since 2016/2017; highlighting the potential for a stronger bid behind Silver v/s Gold, particularly if this short-term breakout can hold.

To learn more about the Gold/Silver ratio

Gold/Silver Ratio – Monthly Chart

Gold Silver ratio

Chart prepared by James Stanley; Gold/Silver on Tradingview

Taking a step back on the Silver chart, and there is a similar case of digestion showing as price action has spent much of the past six months digesting gains from the five months before that. But, from the weekly chart below, you can see the recurrent tests of the 27.00 handle, and the nearing confluence with the resistance portion of that formation. On the underside of price action, there’s been a penchant for support to show around the 24.50-25.00 handle, presenting a box-like formation that can lead to future breakouts.

To learn more about symmetrical triangles and how to work with them, check out DailyFX Education

Silver Weekly Price Chart

Silver weekly price chart

Chart prepared by James Stanley; Silver on Tradingview

Silver Near-Term – What to Watch For

At this point, Silver prices remain relatively subdued below these longer-term forms of resistance. But, if buyers are able to breach the zone running from 27.00-27.24, the next level of resistance plots around 27.92, the current five-month-high. A test above that would also amount to a topside break from the triangle, which keeps the door open for further bullish breakout potential.

Beyond that is a big area of resistance around the psychological 30-handle, and this is very near the current seven-year-high. If buyers are able to sustain a break through 30, matters can get very messy very fast.

Silver Daily Price Chart

Silver Daily Price Chart

Chart prepared by James Stanley; Silver on Tradingview

— Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

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