Since my last update, the price of silver has given back most of the gains from the previous week. In fact, the price of silver actually finished the month of March in the red. After topping out at $16.50 on March 27, the precious metal dipped below $16.30 just two days later.
But there is a bright spot in this recent movement for precious metal investors.
Despite moving in a narrow range between $16.25 and $16.80 since early February, silver has bounced back on weakness from both the stock market and the dollar.
That allowed silver to establish a higher low at the end of last week before entering the long Easter weekend. And that may be our sign that silver’s ready to join gold in what’s traditionally been a bullish seasonal period for the precious metal.
Meanwhile, a couple of my favorite silver indicators are lining up to suggest higher silver prices in the near future.
Before we get to those two indicators, here’s how the price of silver has trended this week…
How the Price of Silver Is Trending Now
The early part of last week saw silver dominated by strong stocks, then the second half of the week was dominated by a stronger dollar.
On Monday, March 26, stocks enjoyed a healthy rally while the dollar stayed weak. That was enough to support silver, which jumped shortly after the open from $16.60 to touch $16.75. From there it backed off, consolidating into the afternoon and eventually closing at $16.72.
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Then, on Tuesday, renewed dollar strength and early day stock strength weighed on the gray metal. Silver opened lower, at $16.59, and kept falling until it bottomed at $16.45 at 11:00 a.m. After 1:00 p.m., stocks started heading south. The safe-haven dollar rallied at the open, pushing the U.S. Dollar Index (DXY) all the way up to 89.50 by 8:00 a.m., then retreated and consolidated around 89.40. That kept silver in check, which only managed to recuperate and close at $16.50.
Here are the DXY and Dow Jones for the past week.
Wednesday would be a repeat for silver, as stocks moved sideways, and the DXY rallied to 89.80 by 10:00 a.m. The DXY continued rallying to 90.10 by midafternoon. Silver opened at $16.43 and immediately sank to $16.26 by 11:00 a.m. With the dollar consolidating high, silver only gained back $0.01 to close at $16.27.
Then, on Thursday, the last trading day before the long Easter weekend, the DXY hovered above 90 most of the day while stocks rallied. Silver opened at $16.27, then showed a bit of strength, rising on the day to $16.35.
On Easter Monday, stocks sold off as news of Chinese trade tariffs emerged, helping to light a fire under silver prices. The DXY bounced to 90.10 as the Dow Jones tanked, losing 640 points, or 2.65%, by early afternoon. Silver opened at $16.53, then soared to $16.67 by 2:00 p.m.
Now that we’ve examined how the price of silver was trending this past week, these are the indicators that will be driving silver’s momentum in April…
What’s Next for the Price of Silver in April 2018
Here are two of the indicators I’m watching closely for signs that silver is in the early stages of a new rally.
First is the gold/silver ratio, which simply tells us how many silver ounces it takes to buy an ounce of gold at a given point in time. The ratio has just recently hit 81, which is extreme, as it has only happened a handful of times since 1980.
This has often been a “reversal” turning point with the ratio falling, possibly pointing to considerably stronger silver prices.
The second indicator is sentiment-based. By looking at the Commitments of Traders (COT) reports for silver futures, we gain insight on the possible direction of silver prices. The latest report tells us that silver hedgers, considered the “smart money,” had their lowest ever short exposure on a percentage basis of total silver contracts. While this is certainly not a guarantee, it does help silver’s odds of rallying from here.
Monday’s action, while not shown on this chart, pulled silver prices back up to the 50-day moving average line.
As well, silver’s Thursday low may have been a new “higher low,” bolstering the case for strength ahead.
Looking at the silver-stocks-to-silver ratio, Monday’s action in particular was very bullish.
The ratio sliced upward through the 50-day moving average on Monday, as the RSI and MACD also continued to track higher. So as silver begins its move higher, silver stocks look like they are starting to outpace the metal.
I think silver is on track to reach $17.50, its first overhead resistance level, by late April. The next target of $18.00 is within range by the end of spring.
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