Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

Silver Lining For Precious Metal

By Fawad RazaqzadaCommoditiesAug 10, 2022 06:23AM ET
www.investing.com/analysis/silver-lining-for-precious-metal-200628315
Silver Lining For Precious Metal
By Fawad Razaqzada   |  Aug 10, 2022 06:23AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
Silver
-2.00%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
USD/JPY
+0.33%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
DX
+0.26%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
Gold
-0.76%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
  • All eyes on U.S. CPI 
  • Precious metals have made post-nonfarm payroll highs
  • Silver’s hammer monthly candle off key long-term support suggests low might be in

Precious metals have been able to make new post-nonfarm payroll (NFP) highs at the start of this week, which is something you would not expect to see given how the likes of the USD/JPY and government bonds reacted on Friday.

The fact that gold and silver have expanded their recent gains (albeit off their weekly highs at the time of writing), suggests that the jobs report has not materially impacted the market’s view that the U.S. Federal Reserve will slow the interest rate hikes before going in reverse in 2023. 

Perhaps the market is waiting to see how strong or otherwise July’s core inflation print will be today. But if the NFP report is anything to go by, we may well see investors buy any CPI-related dip in gold and especially silver. 

How will CPI impact gold and silver?

I reckon a small beat on headline CPI will not lead to a big rise in the dollar, for as long as it eases from the 9.1% annual inflation print we saw in June. Analysts expect it to have eased to 8.7% in July.

Core CPI is seen rising to 6.1% in July from 5.9% in June. For as long as core CPI is around the expected figure, or better still sharply lower, precious metals could potentially end the day higher.

It is worth mentioning that the next Fed meeting is around 6 weeks away. So, the market will not put too much emphasis on a very small beat. However, if inflation proves to be too hot then it is difficult to remain bullish on metals in the short-term outlook, especially with both gold and silver testing some key technical levels.

Silver in bullish channel

After a nice recovery in the latter parts of July, silver started August with some bullish momentum. However, it has now retreated a little after reaching a key resistance level around $20.60ish, which had been support on a couple of occasions earlier this year before prices dropped. The so-far small pullback from this area leaves some question marks about the directional bias. 

Silver Daily
Silver Daily

Still, silver remains inside a bullish channel and was testing short-term support around $20.37 at the time of writing. Unless it breaks out from this channel to the downside, the path of least resistance would technically remain bullish. Thus, even if we see a bit further weakness in reaction to today’s eagerly anticipated US CPI report, for as long as the channel holds on a daily closing basis, this will keep the bulls happy. 

Silver’s monthly hammer is a bullish sign

If we zoom out to the long-term monthly chart, we can see that in July silver created a nice hammer/doji candle off key long-term support around $19.00. 

Silver Monthly
Silver Monthly

This type of a candle is typically found near the bottom of a trend, implying that silver may have reached a low.

How and when to trade silver?

Well, that all depends on the level of risk appetite each trader has. For very aggressive traders, today’s dip offers an opportunity to take advantage of the new upward trend. This group of traders will not be too concerned about the CPI release.

But for the more conservative traders, well, they may wish to wait until after the US CPI report is out of the way before potentially looking for new log setups. These traders would like silver to hold above July’s high ($20.37) following the CPI release or ideally by the close of play on Wednesday as this would suggest the bulls are still in charge of price action following last month’s reversal. 

In this scenario, the next bullish objective would be the $21.50-$21.66 range. The lower end of this range marks the 38.2% Fibonacci level (see the daily chart), while the upper end was previously a key support level as one can see from the monthly time frame.

However, in the event US CPI is so strong that it leads to a breakdown of the channel, then at that point all bets are off. Bullish traders will then need to wait for appropriate bullish price action in the days ahead, before looking to potentially get long again. 

Silver no longer ideal market to short

Given silver’s big decline earlier in the year and the fact that it has shown some reaction from a long-term support zone between $19 to $20, I don’t think this is an ideal market for the bears to take advantage of as the downside could be limited. 

Disclaimer: The author currently does not own any of the instruments mentioned in this article.

Silver Lining For Precious Metal
 

Related Articles

Silver Lining For Precious Metal

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (5)
trevor hron
trevor hron Aug 10, 2022 4:47PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thanks for the article and insight. It sure seems like silver is building a base in the low $20 range. If silver is in fact consolidation mode then we should be able to maintain this bullish channel. We may see more weakness in the USD as well which will help price action. It seems like the $ was over bought. With the Fed possibly taking their foot of the gas pedal it will offer more weakness in the 💴 and bullish momentum in precious metals.
Mohd Izhar Muslim
Mohd Izhar Muslim Aug 10, 2022 2:30PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thank you for sharing the article 💯
Phil Kimmel
Phil Kimmel Aug 10, 2022 8:53AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Steer vlear of silver and gold - proven loser commodities!
ضياء سداد
ضياء سداد Aug 10, 2022 8:52AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Jamie Kent
Jamie Kent Aug 10, 2022 7:17AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
outside of a widespread market crash it is hard to believe silver could go below the $18-19 level seen earlier this year. The risk is low and potential gains are high. Silver is a solid buy.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email