Silver continues to lose ground on Friday and has dropped close to the September low. We could see further movement in the North American session, with the release of U.S. durables and consumer indicators.
Silver prices continue to decline. In Friday’s European session, the metal is trading at $17.53, down $0.27, or 1.54% on the day. This marks a decline in prices for a third successive day.
Dollar Flexes Muscles, Pushes Silver Lower
For traders looking for volatility, silver has certainly delivered this week. On Monday, silver roared out of the starting gates, rising 3.5%. However, these gains would short-lived, as the metal surrendered these gains on Wednesday and retreated below the symbolic 18.00 level. The downward movement has continued, as silver has touched a low of 17.41, within a whisker of the September low of 17.38. What precipitated the sharp decline? One key factor was the impressive rally by the U.S. dollar on Wednesday, which was sharply higher against the major currencies. The rule of thumb is that commodities tend to fall when the dollar rises, and gold prices also declined significantly on Wednesday.
Next – U.S. Durables, Consumer Data
Investors have increasingly relied on silver as a safe-haven asset, much like gold. This helps explain the volatility that silver has exhibited since mid-July. For example, the sharp gains of 12.8% in August reflected higher risk apprehension as a result of escalating trade tensions between China and the United States. In August, silver actually outperformed gold, which posted gains of 7.6%. Keeping in mind that silver is a safety valve for investors, key numbers on Friday could trigger stronger movement in the North American session. Highlights include personal spending, durable goods orders and consumer confidence. Out of these, core durable goods could have the strongest effect on silver prices, since the markets have projected a sharp decline of 1.1% in August. This follows an impressive gain of 2.1% in the previous release. Any contraction in core durables could sour investor sentiment, and silver prices could rebound as a result.Silver Technical Analysis The recent downward movement is putting strong pressure on support at 17.50. This line has held since September 16, but was tested earlier on Friday. If silver can break below this level, we could see the metal drop closer to the round 17.00 level. On the upside, the round number of 18.00 is the next resistance line. Above, we find resistance at 18.60. This line has strengthened as silver has moved to lower ground.XAGUSD 4Hour Chart
Kenny is an experienced market analyst, with a focus on fundamental analysis. Kenny has over 15 years of experience across a broad range of markets and assets –forex, indices and commodities.
