The silver market has broken below the $60 level, an area that we have been watching very closely for signs of life.
Silver
The silver market has broken below the $60 level, a large, round, psychologically significant figure that I think will remain fairly important.
The question is, can we continue to drop from here? There is a little bit of leeway down to about $57.50, and if we break through there, then I think the trap door opens. That sends the market down to the $50 next.
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That being said, it's worth noting that the inverse correlation between rates and the silver market has broken down a bit, with rates dropping no longer providing a bit of a boost for silver. I think short-term rallies are possible in this area. There certainly will be value hunters and perhaps short sellers willing to cover their position, but I would look at that with great skepticism.
Inflation Dynamics and Long-Term Supply
The 200-day EMA sits right at the $67.60 level, and I think that will be a difficult area to break above. If we were to break above that, it would be impressive, but ultimately, I think what people are starting to price in more than anything else is a lack of inflation. That will drive down commodity prices.
Longer term, though, we do have a major supply imbalance between silver and the demand; there just isn't enough out there, and if that's going to be the case, eventually we get another shot higher like we had seen last year.
I just don't think in the present environment, with people focusing mainly on the Strait of Hormuz reopening, that we see a lot of inflationary concerns. It's also starting to look like inflation peaked in the United States, which, of course, is a major driver of this, as it influences the US dollar.
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