Let us have a look at the white metal from the non-USD perspective now.
In this chart we see that the bottom is in and silver’s price is now at the declining long-term support line. When this was last seen, late in 2012 (RSI levels were oversold then as well), prices soon rallied sharply and rose 10% in just a few weeks. With similar trading patterns and RSI levels seen in recent days, there appears to be a good possibility that a sharp move to the upside may be just around the corner here.
Since the correlation between gold and silver and the U.S. dollar start slowly returning to normality (i.e. it is becoming strong and negative), the fact that the dollar is – in our opinion – likely to decline, could translate into higher prices of these two precious metals (and in fact in the whole sector). We would like to address one of our subscriber’s questions here, however, to clarify that it is not the only thing that is behind the white and yellow metals’ prices:
Before summarizing, we would like to comment on one more issue – the recent strength in the USD Index, as we received quite a few questions about it this week.
The dollar is higher than it close last week and gold is more or less flat – so while gold moved in the opposite direction to the USD Index on a day-to-day basis, it overall responded positively. Gold (and silver as you can see on the above silver:UDN chart) is oversold not only from the USD perspective but also when we consider its price in other currencies. That (plus several other reasons) is why gold is likely to move higher even if the USD doesn’t decline and gold is likely to accelerate if the USD does indeed decline.
Summing up, the signals are somewhat mixed for the white metal this week. The breakdown below the rising long-term support line will likely be confirmed with a third weekly close below this level, but prices may still reverse soon because the situation in gold remains positive. The short-term picture is a bit more bullish with an oversold situation and trading patterns similar to those which preceded a rally very early this year.
Thank you for reading. Have a great weekend and profitable week!