A couple days ago we pointed out the huge upside potential in the silver chart, especially relative to gold. This morning Silver is breaking out with a nearly 4% gain:

Click to enlarge

Silver_Breakout

Silver futures are testing the 38.2% Fibonacci retracement level of the entire August-December decline. Over $21.25 silver should quickly head up to more substantial resistance near $22.

However, as pointed out by J.C. Parets of Eaglebay Capital this move up in silver has much more significant longer term implications than simply a 5%+ short term rally:

Silver_downtrend

Meanwhile, with this morning’s move higher ($1319 as of this writing) gold has moved above its 200-day moving average for the first time in more than a year and right into the teeth of some major levels from last year:

Gold_daily_2.14.2014

The upside target from the ‘golden diamond’ pattern has now been achieved and despite the fact that there is a large inverse head & shoulders pattern still very much in play, gold bulls will want to continue to see a steady 2 steps forward 1 step back type of advance rather than a short lived upside blow-off move – some consolidation in the $1300-$1320 area before a test of the $1350-$1360 resistance zone would be quite healthy.