The Silver market has been choppy again on Thursday, as we are sitting just below the crucial $60 region. At this point, can we see even further selling?
Silver
The Silver market has been noisy and choppy during Thursday trading as if it's trying to find some type of floor. I find this interesting because somewhere around the $57 level is the bottom of a cluster that forms the support that extends all the way to the $60 level.
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If we do, in fact, break down from here, I don't really see much keeping Silver from hitting the $50 level. The $50 level has been important multiple times in the past, going back multiple decades, and as a result, I do think there's a lot of market memory there. If we give that up, Silver's in serious, massive trouble.
Evaluating Inflation and Monetary Policy
In the short term, a rally could make a bit of sense. We are a little extended, but I would look at that rally as a potential selling opportunity at the first signs of exhaustion as the US dollar continues to strengthen. In fact, they're suggesting possibly now as many as 3 interest rate hikes coming from the Federal Reserve, and that is not good for Silver.
The longer-term supply and demand situation still suggests that Silver should be higher priced, but I also recognize that right now we're trading on the idea of inflation or maybe a lack thereof. That previous ramp-up late last year and early this year was all about inflationary concerns. If inflation drops off a cliff, then maybe we have a scenario where commodities pay the price.
I like Silver longer term. I like investing in it, but again, that's an investment. That's not the situation we're in right now. Short-term rallies at this point in time would have to be looked at with suspicion, at least until we break above the 200-day EMA, which is about $10 from where we are right now.
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