Silver prices were lower again in today’s session. In fact, many things were sharply lower today including gold, silver, oil, and stocks. Silver, in other words, did not get any help from outside markets today.One could argue that there are several factors that are currently contributing to the decline in silver. Regardless of the reasons, prices does in fact continue to head lower.
Silver has fallen apart quite a bit since breaking out of the previous trading range to the downside. In fact, silver futures for May delivery spent almost 5 weeks trading in a range from $28.50 to $29.50. Typically such a tight “coiling” of market price leads to a large breakout and that is exactly what we have seen. It appears obvious that the silver market was lined with sell stops below that range and that would help explain the drastic move lower in price in just a matter of 3 sessions.
Investors continue to put money to work in stocks and other risk assets. The fact that the equities market seems to just march higher and shrug off any potentially bad news has investors that are not already in the market dying to get in. Now this may end poorly for late comers to the party at some point, but for now the strength in equities and risk assets has really put a dent in the safe-haven appeal of precious metals.
It is simply amazing how the market is able to shrug off such issues as Cyprus, the potential military conflict with North Korea, and the slowing economy in China. It is quite likely that silver and metals stay under pressure until equities come under pressure. It is likely that a correction will come, the bigger question is when….
From a technical standpoint the precious metals markets have suffered extremely heavy technical damage. The daily as well as weekly charts of silver are clearly lower. Silver futures for May delivery look like they are headed for a definitive change in trend on the monthly time frame as well. Silver has come down and tested the $26.50 area on a few occasions previously and held.
In fact, it has seen some decent bounces out of this area. What does stick out this time however, is the fact that silver has made lower highs on each subsequent bounce. In fact, silver has made a lower monthly high for the last 5 months and is threatening to do it again for a 6th consecutive month.
It is hard to say what the catalyst for a rally might be. Perhaps increasing geopolitical tensions, or a European bank run. The non-farm payrolls number this Friday could be interesting. Should the number be a big miss, that could drive safe-haven demand back into silver and precious metals. Should the number beat expectations however, the rally in equities and risk assets will likely continue and thus the metals markets may remain under pressure. We shall see….
Chart Source: QST