In "The Lone Ranger," the famous black-and-white TV serial on Wild West justice, the masked crusader on horseback leaves behind a silver bullet each time he rights a wrong, to tell people to believe that all will be well from here. Similarly, silver’s price charts are now telling precious metals bulls that all might be well after one of their worst rides on that commodity's market.
With a 2-1/2 year low of $13.91 an ounce on September 11 and a three-week high of $14.55 on September 25, silver futures on New York’s COMEX appear to have bottomed out, says Mike Seery, who studies technicals for an assorted number of commodities at his Seery Futures office in Plainfield, Illinois.
“If you take a look at the daily chart, the downtrend line has been broken for the first time in months,” he said, adding that it was a signal that the worst was over, at least for now, in silver.
“I will be looking at a bullish position as the chart structure is starting to improve on a daily basis. Therefore the risk/reward could be in your favor in next week's trade.”
While silver appears to have broken out of a three-week consolidation pattern, daily price swings in the metal were just a couple of cents at times, which Seery noted was “extremely low for such a historically-volatile commodity”.
Investing.com’s own daily technical outlook has a “Strong Buy” call on COMEX silver’s December futures contract. The contract currently hovers above the 20-Day Moving Average of $14.166. Investing.com’s strongest sell targets only emerge between the 100-DMA of $15.367 and 200-DMA of $15.930.
Although it’s classified as a precious metal, silver, for all intents and purposes, remains an industrial metal.
Alternatively known as “the poor man’s gold”—a reflection of its lower value and fundamentals compared to bullion—it has indeed delivered paltry returns to investors this year, who could be looking at losses of at least 16 percent despite the recent rebound on COMEX. That would make it the market’s worst year since a drop of nearly 20 percent in 2014.
Some say such losses aren't fully justified for a metal needed in making almost everything from coins to cell phones and solar panels, aside from jewelry and medical instruments. But others argue that for all its virtues, silver doesn’t have the financial liquidity and portability of gold, and probably never will. It is poised, therefore, to remain in the shadows of its more lustrous cousin.
Just two weeks ago, another Investing.com analysis concluded that silver was incapable of staging a rally independent of gold.
Now, Seery and ADM Investor Services, which also plots daily technicals on commodities, think silver may be able to hold its own against bullion:
“Stochastic indicators are rising from oversold levels, which is bullish and should support higher prices,”
ADM said of silver, on Wednesday, referring to momentum patterns that compared the white metal's closing price to a range of prices over a certain period. "The next area of resistance is around 14.672 and 14.806." ADM added.
Seery compares the value of silver to crude oil, another key industrial commodity currently trading at near four-year highs. He added:
“I think silver prices are way too low compared to crude oil at this time. I also think that the volatility will certainly kick up in the next couple of months, which will be a good thing to see.”
While some analysts see the gold/silver ratio of 85:1 as a weakness for silver, others view it as a buying opportunity. The ratio, derived by simply dividing the prevailing price of gold over silver, is at one of its highest since 1991, when it almost reached 100:1 as gold rallied on the back of geopolitical worries ratcheted up by the Saddam Hussein-era Gulf War.
Clint Siegner, director at the Money Metals Exchange in Eagle, Idaho, said:
“We strongly suggest favoring silver any time the ratio hits 80 or more. And we believe investors should continue overweighting silver until the ratio gets to 50 or below.”
“We think history is likely to repeat here and that silver will outperform gold in the years ahead.”
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