Silver prices declined in tandem with spot gold prices as the US dollar rebounded strongly and NFP figures came in well under market expectation at 345,000 jobs lost, against a market forecast of 520,000, a significant difference and one which created sudden and immediate volatility across all markets. However, the fall in silver prices cannot simply be explained by investors moving back into riskier assets given its dual role as both an industrial and precious metal, and from a technical perspective it is perhaps more helpful, given the volatility experienced on Friday, to take a look at the weekly chart for silver prices, which perhaps provides a broader view of the market and a different perspective on the current trend, with spot silver closing on Friday 63 cents lower on the day at $15.240 per ounce.
From a technical perspective last week's candle on the weekly chart certainly has a bearish tone, and whilst not a shooting star, it certainly has some similar characteristics, with a narrow body and deep upper wick, and following four weeks of gains ( as for gold) it was no great surprise to see a reversal, albeit magnified by Friday's NFP data. The worrying sign from the candle, and perhaps for a continuation of the longer bullish trend is the failure to breach the strong resistance in the $16.50 price region which is clearly defined on the weekly silver chart, and this may well prove to be a difficult area to breach if we are to see a move back to $18.50, and above, in due course. With all three moving averages pointing higher, there is no reason to suppose at present that this is anything other than a short term pull back. However, should we see a deeper move back to retest support at the $14.50 region coupled with a break below the 9 week moving average, then this could signal a deeper move, possibly as low as $13.75 or lower.
As I have already outlined in the gold commentary this morning, with the probability that the stream of fundamental news is likely to show an improving economic picture in the next few months, we are increasingly likely to see volatile days, as we saw on Friday, with investors flipping their risk appetite as fear oscillates between that of deflation which now ( apparently ) seems to be receding, to the fear of inflation, as the market overshoots with low interest rates and an economy awash with cash, so we are in for a bumpy ride in the next few months.
The short and long term trends are bullish while medium term trend is sideways.
Support: $15.150 (Friday’s low) Resistance: $16.003 (high of 02/06/09)
Support: $15.040 (yesterday’s low) Resistance: $15.760 (high of 29/05/09)
Support: $14.620 (low of 28/05/09) Resistance: $15.518 (9 day moving average)
