Silver is moving higher this morning. Although the precious metals started today’s session off on the flat side, metals are now beginning to catch a bit of a bid, as silver futures for May delivery are currently trading up about $.39 at $28.99.
The precious metals complex has been under intense pressure lately as technical selling along with longs capitulating has caused prices to plummet. The precious metals failed to attack the top end of their trading range much less break out of it and this is likely the biggest reason for the drop in prices.
In addition to the failure to truly challenge upside resistance metals appear to have been victimized by widespread confusion following comments from Fed chief Ben Bernanke and company. The markets had feared a premature removal of the money spiggot that is currently driving the rally in global risk assets and especially equities.
Since initial reactions following the release of FOMC minutes a few weeks ago, Bernanke has made it his mission to reassure markets that the money printing will continue for the foreseeable future. This has led to more buying of U.S. stocks and increased investor appetite for risk. This has weighed on silver prices but should not be expected to last forever.
As a matter of fact, precious metals have hung in well given the almost euphoric state of investors right now. We do not have a crystal ball and certainly anything can happen. What seems to be a likely scenario however, is that metals get bought up once this fed driven rally in risk assets comes to a halt.
This could be tomorrow, next week, next month, or next year. It will come to an end at some point though. One can certainly make a great argument for silver prices exploding at that time.
Lets not forget the bigger picture here. When the music stops many people will be left without a chair. The economy will have to pay for all the free money and liquidity provided by the Fed. Inflation has the potential to run rampant. Frankly the list of reasons to own silver or gold goes on and on. Investing in precious metals is not about what prices do today or tomorrow or next week or next month. It is about the long haul- and protecting wealth in the process.
One should look at currently depressed prices as a potential buying opportunity for the long- term. Silver bulls are still on their heels as the bears maintain solid technical control. Silver is infamous for turning on a dime, and this time around may be no exception. If recent swing lows hold, look for a test of $30.00. Consecutive closes above this level will likely attract more buying and silver could then test the $31.00 area in short order.