Silver Continues to Build Up Momentum
- Silver back above 50-day EMA
- Recovering nicely after initial pullback
- Currently in major wedge
- Central banks should continue to support
Silver markets have been rather choppy over the last several sessions, but they were especially interesting on Tuesday. We initially thought the market would drop below the 50-day EMA, but we saw it turn around and recover again. The market has been hovering above an uptrend line for some time, but recently it has seen a bit of a downtrend line push lower. This builds up inertia, which of course leads to explosive movements.
There is continued uncertainty around the world. That does help precious metals markets overall as it offers a nice way to look for safety. As the silver market tested the $17.00 level underneath, it found quite a bit of support, which is a good sign for the longer-term. Ultimately, the $18.00 level should offer resistance. As a result, if we were to break above there, it could continue to push this market to the upside.
As uncertainty increases with such things as the US/China trade talks, and of course the disappointment that will almost certainly bring this week, it makes sense that silver will be looked at as a potential safe haven. Beyond that, central banks around the world continue to cut interest rates in what is a slowing environment, as far as global growth is concerned. That helps precious metals as well, as fiat currencies have a major “race to the bottom.”
The technical setup in this market so far has been quite easy: you simply look for value and take advantage of it. Right now, as we are close to the 50-day EMA it’s likely we will continue to find buyers on perceived value. Longer-term, the market has pulled back quite nicely; after a 15% gain in the month of August, it was probably needed. Quite frankly, it would take some type of major switch in the fundamental setup to cause this market to fall apart.
To the upside, I fully anticipate that silver markets will see the $20 level over the next several months, especially as it becomes obvious that the global situation is getting worse, not better. Ultimately, the $18 level is a minor barrier that could cause some issues over the next couple of days. However, building up a position over the longer term makes quite a bit of sense. Although gold markets are rather volatile, they can be quite profitable as they tend to trend over the longer term quite nicely. By the end of the year, we should see a $20/ounce price print.
Longer-term, the market will probably go much higher than that, given enough time. However, the $20 level will be psychologically important, so obviously we are setting up for a huge battle in that area once we get there. Now that value has returned to the market, longer-term money seems to be flowing in.