After putting in a distinct bottom early last week, silver has staged a roaring comeback.
From Tuesday’s low to Friday’s high, silver was up 3% over just three days. Today (Tuesday, May 15), silver prices are hovering near $16.30 per ounce.
The markets powered higher last week as the dollar headed south. That was enough to help push silver prices higher, as investors recognized its relative value.
Meanwhile, technical indicators continue to flash green for the grey metal even as stocks climb. Plus, the dollar may only be taking a short-term rest before grinding higher.
Given silver’s bounce back over the last couple of weeks, even as the dollar continued to rise, this precious metal is more than holding its own, in my view.
I think silver’s going to soon gain recognition more as a massively undervalued asset than as a safe haven.
Before I get into my silver price outlook, here’s how the precious metal is trending now…
How Silver Prices Are Trending This Week
Silver started out on Tuesday (May 8) in rough shape, thanks to a soaring dollar that pulled the U.S. Dollar Index (DXY) up to 93.22 around 9:30 a.m. By late morning, silver bottomed around $16.30, which would be its ultimate low for the week.
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Despite the DXY pushing even higher on Wednesday, to a peak of 93.40 before correcting, silver managed to climb to $16.56 before settling back to $16.46. The next day, the dollar fell further, and the DXY traded down to 92.70, allowing silver to climb to $16.69 to end Thursday trading.
Here are recaps of the DXY and the S&P 500 for the last five trading days.
Stocks moved mostly sideways on Friday and Monday. But the dollar put in a bottom on Monday morning, with the DXY touching 92.25 before reversing course to reach 92.65 by late afternoon. That punished silver prices, which dropped to $16.60 mid-day before dropping again to close near $16.48.
Now that we’ve looked at what was behind the rally in silver prices this week, here’s where I see them heading from here…
What’s Next for Silver Prices in 2018
So what can we expect next from silver?
Let’s look to the charts to see what’s been and what may lie ahead.
After a remarkable countertrend rally for the DXY, which took it from 89 to 93 in under a month (that’s a stunning 4.5% gain for the king of currencies), it seems it’s due for at least a short rest. The RSI and MACD momentum indicators have rolled over, and now the DXY’s likely to at least get drawn back down to its 200-day moving average, near 91.85.
We’ll need to watch the dollar closely for clues about its near-term direction, as that could impact silver’s direction.
As for silver itself, it’s certainly behaved well over the past two weeks.
With the dollar climbing since the start of May, silver still managed to jump from $16.10 to $16.70.
Overhead resistance continues to restrict silver around $16.80. If the dollar corrects further in the near term, silver may retest $16.80 or even push above it. But if the dollar resurrects its recent rally, then silver may test support likely near $16.20.
Meanwhile, two other indicators remain bullish for silver.
The gold/silver ratio continues to head in silver’s favor, trending gently downwards over the past six weeks or so. I think silver will manage to establish new year-to-date highs and new 52-week highs later this year.
If gold stays flat or rises and this ratio continues to fall, silver should be headed higher.
And one of my favorites, the silver-stocks-to-silver ratio, continues to head gradually higher since mid-February.
That portends a bullish rise for silver stocks if silver moves sideways or climbs and this ratio continues to rise.
At the same time, “smart money” commercial hedgers continue to hold a small position that is short silver. And this suggests they feel silver has much more upside from its current levels than downside.
Let’s see what the next few days and weeks bring for the dollar. A bounce in the greenback will not help silver prices gain, but the precious metal has risen along with a stronger dollar in the past. I think silver’s headed higher, and the dollar’s not likely to get in the way.
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