SILVER, gold's often overlooked sibling, is finally stirring with its price decisively breaking out of the resistance of US$15.50 per troy ounce on July 16. The metal continued its upward momentum to just shy of US$16.00 the very next day. At the time of writing, silver prices have broken above the psychological level of US$16.00.

There are several possible factors which have contributed to the sudden rush of market activity towards silver in recent days. However, the key point that investors should take note of is that silver is undervalued at this point, when compared to the recent surge in gold prices. This can be seen by the high Gold Silver Ratio (GSR) which reached a 26-year high this month. Both gold and silver are precious metals and are considered safe-haven vehicles, with gold being the more popular. However, with the higher gold prices, investors shying away from gold could be drawn to silver, seeing it as an alternative investment instrument with growth potential. This view fits with market expectations as silver has traditionally always been seen to be lagging when compared against gold.

Silver attained a year's low of US$14.30 on May 26. Despite being momentarily halted by the US$15.50-US$15.55 resistance levels in June, its prices showed a strong upward thrust in recent weeks. Using a Bollinger Band, we can see that there was a squeeze before the upward price burst, consistent with a break. As price continues upwards, one possibility could see the price testing the next resistance of around US$16.20 before retracing to the middle band of the Bollinger Band. By including a Stochastic indicator into the charts, we can see that the price is currently within the overbought region which aligns with expectations that there could be a retracement downwards should price fail to breach the US$16.20 resistance level. If this retracement happens, it is our view that silver price could potentially test support levels around US$15.80 or at US$15.50. However, if the price of silver were to reach US$15.50, this could be an indication that the bullish momentum has tempered down and silver could potentially begin to move sideways as its price consolidates. However, if the momentum of silver continues to be strong and can clear the overhead resistances, we could potentially see silver prices approaching US$16.60 and beyond in the mid-term.