Silver Faces Pressure as Elevated Bond Yields Deter Buyers

Silver Technical Analysis

The silver market has been rather negative during the course of the trading week, breaking below the $60 level, but we do continue to see a certain amount of support in that area. That being said, I think silver probably could be in a bit of trouble mainly due to the fact that the United States dollar and interest rates in America continue to be elevated.

I’m watching the $57 level in the silver market because if we break down below there, I think that opens up the possibility of a drop to the $50 level. As things stand right now am a little hesitant to get bullish, although we are most certainly in an area where you would expect to see some pushback, $60 being a large, psychologically significant figure.

Fundamental Pressures and Technical Boundaries

If we get over the 50-week EMA at $64.20, then maybe we have a little bit of a move to the upside, maybe $70 waiting to happen, but as things stand right now from a fundamental standpoint, it makes no sense to put money in a non-yielding asset if you can get elevated rates out of a bond, for example. It’s a risk-free trade or as close to risk-free as it gets.

That being said, in the longer term, I do think that the demand for silver will be part of the story again, but we have to get past the inflation concerns. After all, rates are rising because of inflation, and although some people would expect that to drive the price of silver up, it’s a different type of inflation. It’s not a massive demand; it’s a supply-side problem, not in silver as much as everything. We’re still worried about that stagflation-type issue.

If you’d like to know more about how to trade gold and silver, please visit our educational area.