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David Becker
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Silver prices moved higher on Thursday and are poised to test higher levels. With the Electric Vehicle momentum behind it and inflation continuing to rise, silver should benefit from good gold prices and rising material and copper prices. Silver is the metal that conducts electricity the best but its cost relative to copper makes copper electricians favor choice. The weight of the U.S. dollar and declining U.S. treasury yields should continue to generate tailwinds for silver prices, as the U.S. economy continues to gain traction. Thursday’s more vital than expected CPI report shows that inflation is continuing to climb in the United States. Gold has underperformed silver over the past two years, and in an uptrend, this phenomenon will continue.

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Technical Analysis

Silver prices have been moving sideways, hovering just above short-term support near the 10-day moving average at 27.84. Support is seen near the 50-day moving average at 26.79. Target resistance is seen near a downward sloping trend line that comes in near 28.45 and then the May highs at 28.75. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. Medium-term momentum remains negative as the MACD (moving average convergence divergence) histogram prints in negative territory with a declining trajectory that points to lower prices.

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Inflation is Rise

Consumer prices rose 5% year over year, although a base effect helped buoy the returns. Expectations were for a gain of 4.7%. This figure was the largest CPI gain since the 5.3% increase in August 2008. Used cars and truck prices continued their climb higher, rising 7.3% on the month and 29.7% for the year. At the beginning of the pandemic, the rental cars dumped their vehicles, thinking that no one would drive for a while. Now there are no used vehicles available. The new vehicles index increased 1.6%, its biggest single-month gain since October 2009. Core CPI, which excludes volatile food and energy prices, rose 3.8%, versus expectations of 3.5%. That was the fastest pace since May 1992.

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