Spot Silver Chart 3 August 2009

Spot Silver Chart 3 August 2009

Like spot gold the silver chart too posted a sudden and dramatic reversal on Friday with silver prices surging through all three moving
averages to close the session just shy of the $14 per ounce level and ending on a wide spread up bar.  This volatile and unpredictable price action came as a result of chronic US dollar weakness once again and equity market optimism, but as I have explained on the
commentary for gold prices today the associated volume in the gold futures did not suggest that Friday’s move was a true reflection of
market conditions.   Indeed with such low volume on a wide spread up bar one can only conclude using volume spread analysis, that this
was a trap up move.   Meanwhile this morning’s silver prices this morning have opened significantly higher with a gap up move with the
opening price well above the $14 per ounce level and vaulting over the resistance in place at this level.  However, I do advise caution
given the very low volumes seen in the gold futures market on Friday and it will come as no great surprise to see a sudden and equally
violent move lower.   However, given the state of the US dollar as evidenced on the Dollar Index which closed on Friday at its lowest level since September last year, this seems unlikely at present and both gold and silver are basically a dollar play.  My trading suggestion is to follow the Dollar intra day.

Support:    $13.64        Resistance:  $14.05
Support:    $13.27        Resistance:  $13.52
Support:    $12.65        Resistance:  $13.10