After a week that saw the price of silver struggle to notch any gains, its most recent trading day made up for its latest challenge.
The Buenos Aires G-20 meetings provided for the spark that silver prices needed to rally.
Washington and Beijing announced a “90-day truce” in their trade war, whereby both sides have promised not to escalate tariffs any further as they work diligently to resolve their disputes.
That clearly took buying pressure away from the dollar, allowing broad-based gains for commodities, with silver being no exception.
The metal jumped nearly 2% on Monday, joining gold, oil, base metals, and general equities.
Silver prices will now look forward to the Fed’s expected December rate hike, which could provide another catalyst for the metal to rally higher.
Before we look at how the FOMC meeting will impact the price of silver, here’s how the metal is moving now…
A Closer Look at the Movement in the Price of Silver
The silver price initially popped on Tuesday, Nov. 27, to touch the $14.40 level before selling off to bottom at $14.06 near 1 p.m. That damage came as the U.S. dollar index (DXY) reacted, running up to 97.35 as Fed Vice Chair Richard Clarida said the Fed should continue to raise rates gradually while monitoring new economic data.
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However, the metal would regain nearly all that ground on Wednesday, as Fed Chair Powell suggested interest rates were just under the estimates of where they needed to be for a neutral level for the economy. On those words, seen as more dovish than his previous comments, the dollar index dropped in dramatic fashion from 97.5 to 96.5. That boosted silver from $14.15 to $14.35 within minutes.
On Thursday, silver basically moved sideways as the DXY consolidated.
Here’s the dollar index’s action for the past trading week:
The workweek ended Friday with renewed DXY strength pulling the index up to 97.25 as investors eyed the G-20 meeting that would take place the next day. That midday dollar rally pushed silver down to bottom at $14.02 before it clawed its way back to close at $14.15.
But Monday’s action was very bullish as a new China-U.S. trade truce took some froth off the DXY, allowing silver to rally as high at $14.55 just after 9 a.m. It then worked off some of those gains, though still traded at $14.40 by 2 p.m.
Now that we’ve seen how the price of silver is moving now, here’s how I expect the precious metal to move as we head toward 2019…
What’s Next for Silver Prices Ahead of 2019
Now that there’s a truce between Washington and Beijing, the case for a weaker dollar has been bolstered.
I say that because the dollar was being bought as a safe haven as investors hedged against the risk of escalating trade wars. At this point, even if there is a new escalation, it’s likely not going to happen for months thanks to the recent cease-fire.
In the meantime, we can see that the dollar’s new trend, though mild still for now, is clearly downward. And we have technical confirmation of this through the RSI and MACD momentum indicators.
I think the bias for the general markets will now be upward, drawing capital away from the dollar and into stocks as well as precious metals.
Despite its latest rally on the weaker dollar, silver still has to show more strength to prove itself.
Silver is now back at its 50-day moving average, but just barely. That still leaves it within its range of $14 to $14.75.
Now it needs to remain above $14.50, then clear $14.75. After that, I see $15.50 as the next target.
And we may be seeing things turn in the physical markets in the meantime.
The U.S. Mint’s latest sales numbers show November 1-oz. silver coins sales at 1.645 million. That’s 15% higher than October, a sign of bargain buying.
Walsh Trading’s John Weyer, co-director of commercial hedging, thinks the latest thaw in trade negotiations has caused investors to recognize the value inherent in silver at current prices.
I would have to agree with that assessment. And I think December will continue to see silver prices well supported.
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