Hello commodity peeps! Here’s an update on my analysis on silver. From my last post (kindly check here), silver broke down from its 5-month uptrend. The price of gold along with other precious metals dropped as well. One reason is profit taking. In my opinion, another reason is… With the current fiscal situation in the US results to a weaker US dollar. Thus, alternative investments rise such as precious metals and we can see this with the recent run when gold, silver and copper hit all-time high. When these commodities rise, it reinforces the US dollar to drop lower. As a result, the more the US currency value declines, the more their government debt from other country increases. Of course, they don’t want that that to happen so the US government tries to stabilize their currency.
In my technical perspective, after silver broke down from its 5-month uptrend, it tried to head back up but failed. In the process, it seemed to have completed the right shoulder of the a head and shoulders formation and is on the verge of breaking down from the said pattern. The neckline around the 28.30 area is being tested and the 28.00 level are showing signs of heavy buying pressure. However, silver is now moving below the 14 and 50-period moving average that could add to an easier break below the 28.00 price mark. This could bring its price all the way to the next support at 26.50. If more weakness is shown, a drop to the next support at 25.00 could be hasty. On the bull side, a successful move pass above its immediate downtrend could indicated a trek back north. After that, the next resistance could be 30.00.