Silver followed a similar pattern to gold on Friday, as safe haven markets rallied with risk appetite evaporating ahead of the weekend. This occurred because markets absorbed the news that the US authorities had failed to reach any consensus agreement on the impending fiscal cliff that is now dead ahead.
The move higher for the industrial metal was relatively muted, with the March silver futures contract closing the trading session at $30.25 per ounce, having opened gapped up at $29.95 per ounce. Indeed the seminal day for silver was Thursday, which saw the price fall sharply, and ended with a wide spread down bar which breached the psychological $30 per ounce level, but more importantly also closed below the isolated pivot low of the 5th November at $30.75 per ounce.
Moving to the indicators on both the daily and the three day charts, the two most significant are currently the trend and the volume, and looking at the daily volumes first, two aspects stand out. First, the daily volumes throughout the week were bearish and rising, and second, the volume on Friday was significantly higher, suggesting that bearish sentiment is also increasing.
This view is also confirmed on the three day chart, with strong bearish volume here too. With the three day trend now in transition, a change to bearish will add further downwards pressure on the metal, and mirror the trend on the daily chart, which has been bearish since early December.
From a technical perspective, the key level is now the next level of potential support in the $28.50 per ounce level which is now likely to be tested as we move into 2013. Any failure at this level will then open the way for a deeper and sustained development of the bearish trend.
However, given the depth and extent of this price congestion, we can expect to see this area hold, and provide a platform and consequent springboard for a recovery and return to bullish momentum in the medium term.