Don’t Fear the Pullback in Silver Prices; This Is an Excellent Buying Opportunity

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Silver prices have continued to struggle, but the end may be nigh.

Am I crazy? Maybe.

After all, the broad markets keep setting new records. Bitcoin and its ilk have done the same, but exponentially.

Why would anyone want silver? After all, anything and everything else will keep rising, forever.  Right?

silver pricesRemember, above all, precious metals are insurance. And right now, that insurance, especially relative to pretty much all other asset classes, is dirt cheap – which is when you should be buying it.

I’ve been telling you that silver may be bottoming and that silver stocks could be leading them higher. Now we have still more data pointing to exactly that kind of scenario playing out.

Urgent: Executive Editor Bill Patalon just saw something on his precious metals charts he’s only seen twice in 20 years. He calls it the “Halley’s Comet of investing” – and it could lead to windfall profits. Read more…

In investing, there’s never a “sure thing.” But based on the historical action in this sector, as well as its more recent performance, this is about as sure as it’s likely to get for higher silver prices in 2018.

Before I reveal my newest silver price target, here’s a look at how silver is trending right now…

Here’s How Silver Prices Are Trending This Week

Silver’s past week was a near-perfect continuation of the gradual sell-off of the previous five trading days.

The precious metal opened for NY trading on Tuesday, Dec. 5, at $16.23, then cascaded in the face of renewed dollar strength. The U.S. Dollar Index (DXY) enjoyed a morning rally that took it from 93.10 to 93.45 by early afternoon. That was enough to push silver down to $16.02, from which it recovered to $16.06 by the close.

On Wednesday, silver opened at $16.05, but soon weakened again, this time dropping below the crucial, psychological $16 “line in the sand.” The DXY was flying again, with the index running to 93.60 just after noon. Silver hit $15.90 by 1:00 p.m., then recuperated, only barely, to $15.92 by the 5:00 p.m. close.

Thursday was just more of the same. The dollar would keep climbing, with this time the DXY reaching 93.8 by 3:00 p.m. Silver weakened steadily through the day. It opened at $15.80 and sold down to $15.66 by 3:00 p.m., when the DXY peaked. After that, a small dollar retreat helped silver regain $15.69 by the end of New York trading.

Here’s the DXY action for these past five trading days.

DXY

Friday’s action would see a small bout of refreshing strength in silver prices, not surprisingly, as the DXY peaked early, then retreated. Silver’s opening price was $15.80. The DXY at that point was squarely above 94. But as of 11:00 a.m., traders started selling the dollar, and its index would reach about 93.90 by 5:00 p.m. That helped silver regain a little strength to trade hands at $15.82 to end the day in New York.

But with the approaching FOMC meeting, which is expected to end with a rate hike, the dollar saw buyers come back in. That supported a small rally in the DXY to about 93.95. Naturally, silver didn’t like this and opened at $15.76 on Monday, Dec. 11.  From there, it sold down to eventually close at $15.67.

While the pullback in silver prices is worrying to some, this is actually an excellent time to add to your silver positions. Here’s how high I see silver prices heading in 2018…

Here’s My New Silver Price Target for 2018

In examining recent action, let’s start with the U.S. Dollar Index, given the highly relevant Fed FOMC meeting this week.

EOD

The rally in the dollar over the past week has managed to pull the index back above the 50-day moving average. As well, we see a clear reversal upward in both the RSI and MACD momentum indicators.

My view now is the Fed’s likely to go ahead with a 25-basis-point rate hike. Given that most of that is already baked into the dollar, it could still gain a bit more on confirmation of higher rates.  I think it could climb to the 200-day moving average, near 96, then reverse at that resistance level.

As for silver, the pain could be just about over.

$silver CME

We are essentially back to the low of last December, just when the metal bottomed, then reversed on the Fed’s rate hike.

But here’s the interesting thing…

Silver stocks have already bounced back from the same lows of last December.

SIL NYSE

And as I’ve pointed out previously, the silver stocks to silver ratio has already bottomed since mid-November.

Sil:$silver

I take this as a strong sign of bottoming for both silver and silver stocks.

Silver could rally strongly post-Fed meeting, perhaps pulling the grey metal back to the $17-$17.50 range before this year is out.

 

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