Gold and silver rose for the third consecutive week last week despite considerable skepticism as to the health of the rally. The aspect of the recent rally in precious metals that has created the most concern among traders has been the significant underperformance in precious metals mining shares. This underperformance has created a great deal of concern and from my vantage point it's fair to say that the consensus expectation among market participants is for some short term downside ahead in precious metals & mining shares. However, if we are to solely focus on the gold & silver charts the action is fairly straightforward with both gold & silver consolidating near important levels of resistance:

Gold (Weekly)

Gold futures ended the week exactly at the 50% retracement level of the July-December decline after once again testing above the $1260 resistance level and tapping the 50-week simple moving average for the third week in the last six. In one sense the fact that price has failed to hold above $1260 offers some cause for concern. Yet in another sense a pause/consolidation near such an important level is normal price action and to be expected. 

The 14-period Relative Strength Index (RSI) on the weekly time frame has consolidated above its median line and slowly approaching the 'sweet spot' level near 60 from which major advances often begin. Meanwhile the Money Flow Index (MFI) has trended higher throughout the first three months of 2017 and remains below the 80 'overbought' level, offering considerable potential for additional upside. 

Silver has actually performed even better than gold with the outperformance accelerating in recent weeks. The daily chart of silver also shows a consolidation near key support/resistance (~$18.50) with increasingly shallow pullbacks:

Silver (Daily)

After outperforming gold & silver by a wide margin (4x-5x in many cases) for nearly two months from the mid-December low until the February 8th peak, precious metals mining shares have spent the last seven weeks drastically underperforming the metals which they pull out of the ground. While most investors in mining stocks expect outperformance (at least on the upside), the fact is that correlations go through cycles and periods of outperformance often given way to periods of underperformance. 

While I am not wildly bullish on precious metals I also cannot discount the potential energy being built up via growing skepticism among market participants near important breakout levels in both gold & silver. Bull markets climb a wall of worry and from my perch that wall of worry is as tall as it has been since at least December of last year, while price action in the metals is objectively constructive and healthy. 

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