Silver Markets to Break Out

Kate Leaman
Kate Leaman

21 October 2019

silver trading

  • Silver markets break descending trendline
  • Sitting above 50-day EMA
  • Central banks ease monetary policy

Central banks around the world continue to ease monetary policy and add to quantitative easing. As such, it makes sense that traders will be buying a lot of precious metals, as it is a way to preserve wealth when central banks are destroying it. Fiat currency getting hammered based on loosening policy makes harder assets such as silver much more desirable, and in turn drives the price up. Silver is a particularly interesting commodity because it not only has the component of protecting wealth, but it also has a bit of an industrial commodity use at the same time. In other words, it can move higher or lower for several different reasons.

Fiat currency getting hammered based on loosening policy makes harder assets such as silver much more desirable

At this point, there are concerns about global growth, and central banks around the world are flooding the markets with liquidity. That tends to hurt fiat currencies and should put quite a bit of bullish pressure in gold and silver. Silver markets have started to move again after a significant pullback, but that was probably necessary. Remember, August saw the silver markets gain 15%, something that is simply unsustainable.

Technical analysis

Silver chart

The technical analysis has suggested that buyers are willing to step in and push to the upside, as we pulled back below the downtrend line that formed the descending triangle and then broke through it. By breaking through the top of a descending triangle, it negates the negativity of that shape, suggesting that perhaps the sellers are running into some trouble. If that is the case, it makes sense that this market would continue to push to the outside, and perhaps to the $18.00 level next, which was the scene of significant selling pressure. The 50-day EMA is just below, and that will attract a certain amount of bullish attention as well.

The 50% Fibonacci retracement level underneath has offered significant support just below the $17.00 level, and therefore it looks as if we finally got the pullback that may have been needed for the larger uptrend.

In fact, August gaining 15% would have been a good year for most traders, so it should be no surprise that there has been some profit-taking. Now that the market has shown such strength on Monday, it’s very likely that the next fight will be the $18.00 level.

Breaking through there allows this market to go looking towards the most recent highs at the $18.75 level, and then eventually the $19.75 level. Admittedly, this is more of a grind higher than anything else, but we are starting to see a lot of bullish pressure that eventually should take over. With this, buying on the dips continues to look attractive, as it offers short-term value in a market that has been quite bullish for some time. Looking back at the last month or so would suggest that silver will pick up value in the future.

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