Silver has been very quiet during the trading session on Tuesday, as we continue to see support underneath, but more importantly, significant resistance above. The $25 level is of course a large, round, psychologically significant figure, and an area where we’ve seen selling pressure. Beyond that, we have the $25.50 level as well, and therefore I think you’ve got a situation where we probably have to pull back just a bit in order to find support. Underneath there, we have the $24 level offering support as well, as it had previously been resistance. The 50-Day EMA is breaking above the 200-Day EMA, kicking off a “golden cross.”
In general, this is a situation where I think we look for value, then take advantage of it. Remember that silver is highly sensitive to the interest rate situation, especially in the United States. If the 10 year yield continues to drift lower, that will probably help silver along the way, and then of course we have the US dollar itself offering a significant amount of negative correlation at the same time. Furthermore, you also have to keep in mind that silver is not only a precious metal, but also an industrial one. In light of this scenario, the recession will exert downward pressure on the demand for silver, resulting in a negative impact on its price.
All things being equal, this market has shot straight up in the air, and I think that there are plenty of buyers willing to take advantage of it if it offers value, and that pullback should be rather interesting to pay attention to as well. If we break above the $25.50 level, then silver could take off to the upside in a massive momentum trade.
The previous couple of candlesticks before the Tuesday session showed a lot of momentum, and I think at this point it’s probably only a matter of time before those traders out there that have not been involved will try to take advantage of what is obviously a very bullish market. The one thing that could keep the market down is the Federal Reserve, and the ability to keep monetary policy tight or not. All things being equal, expect a lot of volatility but that’s nothing new for this market.
Being FXEmpire’s analyst since the early days of the website, Chris has over 20 years of experience across various markets and assets – currencies, indices, and commodities. He is a proprietary trader as well trading institutional accounts.