Possibilities Trading Silver, Gold Striking Higher?


Simpler Trading Team

4 min read

Two precious metals that also serve as currencies – silver and gold – are looking technically appealing in the middle of this market volatility.

Silver recently made a big move, leaving traders asking, “Is there still room for upside trades in this commodity?”

(Check out the video, above, for insight into trading this changing market.)

Trading silver into a squeeze

Silver (SI) previously spiked up to $30 on the monthly chart – this after reaching $50 at an earlier high. 

This is a typical move a trader might see when a squeeze is involved. The compression of energy and volatility is released – and that can even show up as small price movements on the chart.

Traders watched a big move in the price action – in the form of a squeezer – as the price action spiked from $12 to $30, then pulled back to $22 in consolidation. This event has traders looking at the potential for silver to set up for another squeeze.

The previous squeeze fired off a solid 15 points. If silver were to fire off the same movement, it could potentially reach $40.

Traders are wondering if it is going to happen and, if so, how long will it take? This is the magic question and a valid one. 

Silver hasn’t fired off the squeeze and it could be several months before it does. Moreover, the price action could simply go through consolidation mode for some time.

When silver does fire, traders can expect to see eight bars on the charts – typical length of a squeeze – of upward trajectory or sideways at the highs. Price movement into the 50- or 200-day exponential moving average (EMA) creates conditions for wide-range bar signals traders use for entries and exits – although it requires patience on the part of the trader.

Commodities appealing in economic turmoil

Political and economic turmoil has increased the number of buyers of physical commodities – such as silver or gold bullion – and that has no effect on futures pricing. Although, market sentiment does influence price and movement as traders seek safe havens for cash in commodities.

Market buyers have traditionally sought gold as world events incite panic – whether due to pandemic or inflation fears or some other great fear. Current events appear to be following the same pattern, so far.

Futures are also a possibility, but can be difficult for traders in this environment. Futures allow traders to purchase a commodity asset via futures contracts that are traded on futures exchanges where they agree to a set price at a future date.

If the price of a commodity – silver or gold – pulls back, a trader in a futures contract could lose money.

As an alternative, Simpler’s traders are looking at using SPDR Gold Shares (GLD), iShares Silver Trust  (SLV), or Silver May 22 (SU) to simplify their trading strategies for gold and silver.

Trading gold as an alternative

Gold (GC) has been stronger than silver with a nice run recently – with indications of a “cup-and-handle” squeeze pattern that hasn’t fired. In view of that, Simpler’s traders see the possibility of a run up to $2,400 or better at some point this year.

Whether or not news of the overseas conflict is expediting the market process is not certain. Price action on gold could certainly move faster or trade sideways in this geopolitical climate. Traders could even see a pullback prior to moving higher.

Traders who have a call option – or a right to buy – on gold (GLD) a year out can consider holding onto it.

While neither asset is without risk, gold and silver appear strong fundamentally and technically on the charts. Both exhibit possibilities to still have more moves to the upside left in them.

This has Simpler’s traders looking at opportunities for using silver and gold to hedge against the bears in this uncertain market.