With the price of gold attempting to surge back above the $1,300 level, James Turk told King World News that gold and silver are now close to breaking out but this may be the biggest surprise.
Gold & Silver Close To Breakout
April 8 (King World News) – James Turk: “Gold and silver weathered another option expiry and its aftermath, Eric. These month-end takedowns occur like clockwork, and sometimes at the end of a calendar quarter they can be brutal – like the takedown that just occurred…
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Gold was pushed back under $1,300, while silver’s takedown pushed it below $15. But there is an important observation to make here. Both gold and silver found good support at these levels. This is particularly true for silver, which didn’t close below $15, at least so far. A few short intraday dips by silver below that level were met with ferocious buying, which is understandable.
The gold/silver ratio is still in the mid-80s, with a recent high of 86 ounces of silver needed to buy one ounce of gold. Their ratio should be much lower, but it just shows how out of favor silver is at the moment. So even though gold is undervalued, silver is even more undervalued than gold.
Month-End Option Expiry May Surprise
But I would like to get back to month-end option expiry because an important one is coming up for silver at the end of this month. It could surprise everyone. I’ve mentioned before that one of these days we are going to see an option expiry in which the precious metals explode higher, rather than get pummeled lower. Maybe it will happen with silver at the end of this month.
Even though the expiry and delivery dates for derivatives are a few weeks away, May silver is trading 4¢ in backwardation. That is bullish news, as is the observation I made earlier about silver’s resilience in holding support at $15. The shorts are no doubt getting nervous.
There is another important point, Eric. The key breakout levels are not that far away, as we can see on this daily chart of London spot silver closing prices (see chart below).
Silver Breakout Is Close At Hand
Silver Shorts Headed For Trouble
The downtrend line will be broken around $15.30, which would set up a move to previous peak in the $15.50s. Hurdling above that level would likely result in silver barreling ahead to $16.20. These are the targets we should be focusing on. But once these resistance areas are hurdled, I expect to see some fireworks, which could begin at the end of this month as call option writers and other silver shorts run for the hills.
We all know that higher prices are going to happen eventually because all these paper promises to deliver gold and silver aren’t worth the paper they are printed on, which explains why the physical market never fails to overcome paper selling. Timing is always problematic, but the bottom line is people need to be prepared for the next big move higher.”
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