Silver prices have put in a wonderful performance over the last week and a half. After finally staging an upside breakout out of its trading range, the silver market has not looked back. Although the market has been drifting slightly lower for the first part of this week, we suspect this may just be a needed pullback before silver stages another leg higher. Although anything is possible, markets do not typically go straight or up straight down and we do not believe this time around will be any exception.
This has been a very light data week as many investors are wrapping up their summer vacations this week. Today will likely be the highlight of the week with the release of the July FOMC minutes. Perhaps silver has just been biding its time until this release. The big question, of course, is will the minutes give any concrete clues as to the Fed’s tapering plans? It is quite possible that we see the Fed begin the tapering process next month, however many feel that the process will not begin until October or beyond. There is no arguing the fact that the majority of economic data is continuing to show improvement. The real question is how will the economy stand on its own two feet? Will it keep growing or will it flounder without the Fed’s hand holding?
Perhaps the recent run up in precious metals is telling us something. Perhaps the concern now is that in an environment of rapidly rising rates and a Fed that is likely to begin removing stimulus, is the economy being set up for a fall? We shall see. Let’s hope not….
Silver prices are in an uptrend on the daily chart. It is likely that the market is setting up for a test of the 200 day EMA near the $25 level. On the daily time frame the market continues to trade above key short and intermediate term moving averages which is bullish. Looking at the weekly chart, the $26.25 area seems a likely target for silver prices as it is the 50% retracement of the drop from $34 and change to just over the $18 level. This level also coincides with some previous swing lows and may be an attractive chart point.
Although the dollar is up today, it is near the lows of its recent trading range. Should the dollar index take out those lows, it could add considerable fuel to the fire in silver prices. This market is worth watching closely. In addition, continued selling in stocks could further gains in precious metals and should be monitored. The FOMC minutes this afternoon will likely determine the near term direction for silver, and given what we are seeing we still believe that the market will continue higher regardless of whether the Fed tapers next month or not.
This market update is provided weekly with analysis. You can always check spot silver price per ounce by watching our on-site charts.