Readers will remember how the 2014 summer rally in gold, silver and miners came abruptly to an end in the first week of August. It was not clear at that point in time that the monstrous U.S. dollar rally would be the primary reason to cap the precious metals rally.
Fast forward 10 months … the precious metals sector is at the verge of a huge breakout. This time, the U.S. dollar seems to be struggling so it shouldn’t be the reason to stop the metals. The dollar is cooling off after a rally that lasted 9 months, with a strength only seen once in the last 3 decades.
Silver is the leader in the precious metals space currently. It triggered a breakout on Wednesday May 13th on the daily chart. So far, one day later, it is still confirming its breakout.
The weekly silver chart has its breakout point at $19.00. Once silver structurally breaks through that price level, and stays there for at least 3 weeks, we should have a secular trend change in place. That is when gold and the miners should be following silver’s path.
Peter L. Brandt at kimblechartingsolutions.com created an interesting silver chart last week. He identified a head-and-shoulder pattern on the daily, and plotted the completion time for each phase on it. See next chart.
Note how the starting point of that pattern coincided with the breakdown in silver last year August / September.
Peter’s finding is that the head-and-shoulder pattern has a perfect symmetry at both sides of the “head.” Also, silver did not break below $15.00 in that whole period.
That is certainly proof of a solid base, which sets the stage for higher price levels.
Watch the $19.00 price level in silver for a fully confirmed breakout.