Silver Weekly Fundamental Analysis, October 6 – October 10, 2014 Forecast

December Comex Silver prices plunged last week to its lowest level since February 2010. The momentum on the close suggests traders may go after the 2010 bottom at $15.82.

The catalyst behind the sell-off last week was the better-than-expected U.S. Non-Farm Payrolls report. Traders went into Friday’s report looking for the news that showed the economy added 215K new jobs. Instead, the U.S. Labor Department reported a figure of 248K.

This news sent the U.S. Dollar soaring, pressuring dollar-denominated silver prices. This trend is likely to continue as long as the U.S. economy continues to strengthen and the Greenback maintains its rally.

The divergence in policy between the major central banks is also helping to drive silver lower. At this time, the Fed is considering raising interest rates while the Bank of England remains hesitant. The central bank in Japan, Europe and New Zealand are all in favor of weaker currencies, providing additional support to the U.S. Dollar.

Although hedge and commodity funds are short, they may be looking to lighten up a little and book some profits at current price levels. This may cause a few short-term counter-trend spikes, but because of the bearish fundamentals, these moves may be short-lived and likely to attract fresh shorting pressure.

The longer-term fundamentals such as low inflation and rising U.S. interest rates should keep the downside pressure on the market. However, traders should continue to watch for counter-trend reactions because of technically oversold conditions and the possibility of geopolitical events flaring up.