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Silvers breather could be a good thing

silver chart 26 sep 09.JPG

As we can see from the above chart silver prices have been powering ahead from sub nine dollars in November 2008 to sixteen dollars today. The current breather is a good thing for silver as it reduces the gap between silver prices and the 200dma.

You might it strange that we welcome this breather but we see it as all part of building a stronger footing on which to advance in a more orderly manner. When the gap between the moving averages and the price of silver presents us with a yawning gap of around the 50% ie the price is at $18.00 and the 200dma is at $12.00, then the odds favour a correction. At the moment we can see that a correction is taking place and the technical indicators have turned and are heading south. We see this as a short term correction before the trek north re-commences and as such we are not particularly worried about it.

The two things to watch are the US Dollar and gold prices, the dollar is trying to form a bottom and is hanging on in there, gold has drifted lower and closed at $990.70. Both are rather sensitive to each others behavior. The real fire works will start when gold decides to ignore the dollar and rallies regardless of the the mini rallies that we see from time to time by the dollar.

As usual buy on dips, silver is looking to go higher and the silver producers are warming up to put in some serious progress, if the stocks drop much more then we will look to buy again and will do our best to trail our intentions and post immediately we make a trade.

Have a smashing weekend and get out and get some fresh air. We are doing a 12k charity run on Sunday so next week we will be under the oxygen tent trying to recover, so things may be a tad slower than usual.

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