Following the best start for silver since 1984 during the month of January we have now witnessed quite a bit of capriciousness with silver prices in the past 2 weeks. This supplicates the near-term question: What does the week ahead hold for silver and indeed gold also?
Precious metals markets traded under pressure at the end of last week, as the US employment report came in much stronger than the market’s consensus estimates. This has led to renewed conjecture that the US Federal Reserve will start raising interest rates — a consequence that historically has led to lower prices in both gold and silver. But when we look at the longer-term trajectory of price trends in precious metals it is starting to look like these trends are in serious need of upside correction in order to maintain stability in the broader environment. Shorter-term, markets are currently trading at critical support levels that could inspire a new round of long positioning if the shorts established last week start to take profits.
From a fundamental perspective, the strength we are seeing in labor markets is important to note. Non-farm payrolls showed an increase of 257,000 new jobs and these increases came with upward revisions to the numbers posted during the November/December periods, as well. Revisions to the November and December data suggest an additional 147,000 jobs were created for the period. So, the real question is whether or not this will be enough to influence Fed interest rate policy in a material way. Going forward, gold and silver traders will need to remain mindful of new statement made by voting members at the Fed. Public speeches made here will almost certainly be enough to drive market volatility in the weeks ahead.
Gold remains with resistance slightly above the $1300 range and has very steady support all the way down to approximately the $1230 range while silver will need to breach resistance at $18.50 range or hold support all the way down to $15.50. Expect a bounce in silver to start this week perhaps today and tomorrow but I would like to see gold also bounce in order to confirm that a short-term move is under way.
Declines in silver have been less prominent, as most of the recent selling burden has been centered on gold. Medium-term momentum in silver is still to the downside. But, so far, bearish precious metals traders have been unable to send silver prices below the 15.40 mark. This support zone has been tested multiple times, so this area now marks the line in the sand as the most important level to watch. A downside break here would suggest further weakness throughout 2015. Failure to accomplish this, however, would mean that a bottom is in place, as we mentioned on The Real Money Show this past weekend with the Aden Sisters and also with David Morgan the week before and that silver prices are now very cheap on an historical basis. RSI indicator readings are showing signs of bullishness, so if we are able to remove the long-term downtrend line, there is a strong case to start buying the metal here and now.
With all of these factors in mind, it would not be surprising to see some positive trend moves in the precious metals space throughout this week.
Yours to the penny,
Darren V Long
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