Silver Prices Consolidate Ahead of Critical Employment Report

Silver prices stabilized on Monday in the wake of the market’s anticipation of tightening Fed policy. Gold prices edged higher as the US dollar fell 0.3% today ahead of the critical employment report coming out later this week. However, the dollar should continue to move higher as the debate over whether the Fed will have a 25-basis point or 50-basis point rate hike in March. US stocks will remain volatile in anticipation of the rate hike. The spread between the 2-year and 10-year yields decreased to below 59 basis points, known as a bear flattener. This scenario is harmful to future economic growth. 

Technical Analysis

On Monday, silver prices stabilized ahead of jobs data this week. Prices consolidated at the support level seen near an upward sloping trendline near 22.49. Resistance is seen near the 50-day moving average at 22.92. Short-term momentum is negative as the fast stochastic is printing a reading of 13.09, below the oversold trigger of 20. Prices are becoming less oversold. Medium-term momentum is negative as MACD (moving average convergence divergence) index crossover indicates a sell signal. This scenario occurs when the MACD line (the 12-day moving average minus the 26-day moving average) crosses over the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram prints in negative territory with a downward sloping trajectory pointing to lower prices.

Manufacturing Activity Rebounds in January

In January, business activity in the Chicago area picked up. The ISM Chicago business barometer rose to 65.2, beating expectations of 61.7. In December, the reading was 64.3. Out of the five primary indicators, order backlogs, employment, and supplier deliveries rose while production and orders declined during the month.