Silver Market: May 2006 verses May 2007

By: Bob_Kirtley

Last May 2006, we saw the “sell in May and go away” crowd in action and wondered if we would see a repeat of this sell off in 2007. The truth is that we do not know what the herd will do but we do have a couple of observations that show that Silver is in a vastly different position this year to last year.

Taking a look at the chart for the time frame in question we can see a number of differences between May 2006 and May 2007.

We will look at May 2006 first.

We can see that the price of Silver had raced ahead of its moving averages leaving the 200 DMA a long way behind. In fact the difference between the Silver price at $15.00 and the 200 DMA at $9.00 is approximately $6.00. You can see that this is a huge gap overdue for a correction.

Also note where the technical indicators are: The RSI, the MACD and the Stockastics are all above their middle point with two of them banging on the ceiling. This is telling us that this is an overbought situation.

Now we will look at May 2007.

The price of Silver has made steady progress over time taking the moving averages along with it for the ride. The price of Silver is at $13.00 and the 200 DMA is also at $13.00 so the difference is only a few cents and not the massive disparity that we saw a year ago. This tells us that the price of Silver has not run too far ahead itself as it did in May 2006.

Now note where the technical indicators are: The RSI is close to 30, the MACD is neutral and the stockastics are heading south towards the 20 level. In summary they are more or less telling us that silver is over sold, which is dramatically different from the overbought situation of May 2006.

These are just observations that we can add to our deliberations while trying to decide which course of action we should take. However it suggests to us that if there is a sell off this May then it could be a mild one lasting for a short time only. Gold is also in a similar position and in our view any sell off will also be short lived. This could just be the buying opportunity that you have been waiting for?

By Bob Kirtley
www.gold-prices.biz

Bob Kirtley spent many years working on Oil projects including some in Alberta, such as the tar sands installations in Fort McMurray. He lived and worked in many different countries, as that is the nature of the construction business. Planning and cost control are key to a projects success and he tries to apply those disciplines on a daily basis when dealing with investments. His training in such areas as SWOT and Risk analysis can be applied from time to time.  His qualifications include being chartered in the United Kingdom, which is similar to that of a Professional Engineer in Canada, along with a Masters Degree in Project Management from South Bank University, London, England. 

He has been working for a number of years on a full time basis representing a group of investors in England.

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