Silver soared, so it's bullish, right? Wrong.

It’s been only a couple of days since Thursday, when we closed our short positions and we have already seen a sizable rally in gold and silver. In fact, yesterday’s upswing was so significant that both precious metals already moved to the target areas that we featured on Monday, even though they were “scheduled” to move there at the end of the week. Is the top already in? Silver’s short-term outperformance definitely seems to suggest that it’s either in or at hand…

Let’s jump right into the charts, starting with gold (chart courtesy of

Gold’s Target Reached

On Monday, we argued that gold could move to the $1,340s before the rally is over and we marked this level with the red ellipse. Why there? That’s where we have the previous intraday high and the rising resistance line. The combination of these short-term resistance levels and the pace at which gold usually rallied both fit a scenario in which gold forms the next local top about $20 higher at the end of the week or very close to it.

But, gold has already moved to the middle of the target area, so is there any point in waiting an additional few days before viewing the outlook as bearish? After all, gold shouldn’t rally much higher from here if the rising resistance line is to hold.

In short, the above is mostly true – yesterday’s rally made the situation already somewhat bearish, but at the same time it’s not certain if the final short-term top for this week is already in. We could have a daily pause or so and another upswing before the final top is in. Still, it seems that we are already close to the top.

The most important bearish signs, however, don’t come from the gold market, but from the confirmations that we saw in other parts of the precious metals sector.

Precious Metals Sector’s Relative Performance

The two key things that simultaneously confirmed the bearish outlook for the precious metals sector are: silver’s very short-term outperformance and mining stocks weakness.

The above strength in silver and weakness in the miners become apparent when you compare yesterday’s upswing to the February 14th top. Gold is about halfway back to this level after the late-February decline. Silver almost reached its Valentine’s Day top and gold stocks (HUI) only managed to move to their February 26 top, which is very far from the February 14 high.

That’s a very classic sell signal – underperforming miners suggest that a top is near and the soaring and outperforming silver (on a very short-term basis) serves as an effective confirmation.

About the Author

Przemyslaw Radomski, CFA, is the founder, owner and the main editor of