Silver breaches 100-day average, aims higher

NEW YORK: Spot silver prices may extend their rally to $36 an ounce after three days of gains pushed prices up nearly $2 per ounce, or 6.25 percent, breaking a key resistance level.

Silver surged above the 100-day moving average of $32.43 an ounce on Wednesday, en route to its 200-day moving average, which hovered at $35.49 an ounce on Friday. On Friday, the white metal reached a two-month high at $33.93 and finished at $33.88 an ounce, up slightly from the previous close at $33.43.

Citing silver's break above important resistance and lack of topping signals, Barclays Capital technical analysts said they expect further upside.

"In silver, we look for a close over $33.70 to signal an extension toward $35.70," Barclays chartists wrote in their Technical Focus research note.

In their Daily Technicals Report, Societe Generale technicians also set a near-term target at $35.70, slightly above silver's peak of $35.66 on Oct. 28. The report pegged intermediate targets at $34 and $34.50.

On Dec. 29, silver fell to $26.14, forming a double bottom with its Sept. 26 low of $26.04 an ounce. That Sept. 26 low was the lowest price silver had seen since Nov. 18, 2010.

Silver has been rallying ever since it slid to the Dec. 29 bottom. Charts suggest that if it keeps fluctuating within the upside channel that has been building since then, the next potential target lies at $35.98. That is the trendline drawn off the all-time peak of $49.51 achieved on April 28, 2011.

Societe General's analysts identified downside risks at prior lows sitting beneath $32.29. "Under $32.29, silver will slide to $31.50 and $31.20 or even $30.90," the note said.

Copyright Reuters, 2012