Silver and gold were both trading higher during today’s session as fresh worries coming out of Europe stoked demand for safe-haven assets. As if the banking situation in Cyprus was not enough to worry about, news coming out of Italy today indicates that the stalemate in forming a new government is far from over.
The Cyprus situation along with the Italian political situation forced Italian bond yields higher. Yields on Italian debt have been very closely watched by market participants for some time now, and any time yields rise it rattles investor confidence. These fresh worries about Italy caused selling in stocks early in the day. Treasury prices spiked as yields on U.S. debt fell.
The Euro currency is trading at the lowest levels since late November. Currently, the Euro is trading at $127.82. Should the Euro continue to slide, it will likely weigh on U.S. stocks and risk assets thus increasing the appeal of precious metals. Interestingly, the stock market did climb throughout the day and is currently approaching the unchanged line. The market has once again shown amazing resilience. How much longer can this go on for?
Well that likely depends on further headlines coming out of the EU. Should the situation in Cyprus worsen, should there be a run on a bank, or if some direction with regards to Italian leadership is not seen soon the “straw that broke the camel’s back” could soon be upon us. Time will tell. Banks in Cyprus are due to re-open on Thursday and have placed limits on bank withdrawals. It will be not only interesting but perhaps a little nerve racking to see how things unfold once they do open their doors again.
From a technical standpoint, silver futures for May delivery staged an impressive turnaround this morning. After hitting a fresh 3 week low at $28.08 early in the session, silver reversed and traded higher throughout the session printing a high of $28.74. The fact that gold and silver have failed to truly “breakdown” thus far is encouraging to the bulls.
While the bears due maintain the overall technical advantage still, today’s price action in silver is encouraging-and bullish. The chart would appear to indicate silver building a base at current levels. Although the daily trend remains down, one must also look at the weekly time frame for perspective. Like gold, the weekly silver chart shows a range bound market since October.
Silver is currently in mid-range so caution should be warranted. It does seem, however, that prices are comfortable at current levels and demand is supporting current price levels. We shall see what happens but certainly more negative headlines out of the EU could propel silver prices back to the top end of the trading range. In addition, more shorts are likely to continue to throw in the towel as attempts at lower prices fail. This would also add fuel to the fire should a rally out of the recent range get under way. A move above $29.34 should attract more buyers should it materialize.
Chart Source: QST