The price of silver started consolidating in late January and continued through the past week.
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We knew to expect this, as I had pointed out the metal’s fantastic rise from early November was due for a breather.
While silver prices dropped a little lower late last week to the $15.55 level, they quickly reversed and have already come close to the recent $16 ceiling.
And all of this has happened while the U.S. dollar index tacked on as much as 150 basis points.
Despite recent dollar strength, a dovish tone from the Fed may have capped rate hikes this year. That may limit the dollar’s rally and boost the silver price as we move further into 2019.
Although the gold/silver ratio is stagnating, silver equities are soaring, and they’re rallying at a faster pace than silver prices. This is a great sign for silver stocks and silver itself.
What’s more, we’ve recently gotten a very bullish technical development in silver prices that also points to higher silver before long.
Here’s what I’m watching…
How the Price of Silver Is Trending Now
Silver started out last week on a more neutral note, hovering around the $15.70 level, while the DXY managed to climb again toward 97.
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By midweek, the dollar index was trading back above 97. That did manage to dent silver prices, which dropped to an intraday low early on Thursday. At $15.53, silver wasn’t getting much Valentine’s loving. But a mild turnaround in silver pulled it back up to close at $15.62.
Here’s a look at the DXY for the past five trading days…
The dollar took another run higher on Friday, peaking at 97.29 near 8:30 a.m. But by 2 p.m., it was back below 97 at 96.86. That was silver’s cue to rally, which it did. The metal rallied quite strongly, heading into the long Presidents Day weekend at $15.79.
On Monday, silver consolidated a little higher at $15.81 as the DXY moved sideways near 96.77. But as investors and traders returned on Tuesday, gold powered higher to close at $1,340 while silver rallied to end near $16 at $15.96.
Now, here are the technical factors that could drive the price of silver even higher from here…
Here’s Where I Expect the Price of Silver to Head Now
The dollar index has had quite the run, from near 95 all the way above 97.
It’s possible that the dollar could be in a period of strength, or at least consolidation. If it persists, I’d expect it to meander between 95 and 97.
It’s notable though that the DXY’s latest high has been below the highs reached in November and December. And looking at the relative strength index and moving average convergence divergence, it seems the dollar’s recent run-up may be losing steam.
But like I pointed out in last week’s update, even if the dollar remains strong, silver’s been performing well and could continue to do so.
As for silver itself, it certainly looks to be acting well, although its strength versus gold is lacking.
Silver now needs to close above $16 and hold that level, then take out its late January high around $16.11. On a positive note, silver has formed a bullish “golden cross,” whereby its 50-day moving average has crossed above its 200-day moving average.
But silver hasn’t kept pace with gold’s recent run to $1,340, evidenced by the gold/silver ratio that has risen again to 84.
But we can glean some strength when looking at silver equities.
The Global X Silver Miners ETF (NYSE: SIL) is already up almost 25% since early November.
And if we look at the silver miners to silver ratio, we can see they’ve managed to advance at a faster pace than the metal.
That’s often a bullish sign. I’ll keep an eye on this indicator to see how it plays out.
Now let’s review my recent silver recommendations.
The SLV January 2021 calls with a strike price of $15 are off a slight 2.2% since recommended. Given their long term to expiration, they remain a buy on dips.
The 2x leveraged ProShares Ultra Silver ETF (NYSE: AGQ) is now up 4.6% and is a buy on dips.
Finally, the Global X Silver Miners ETF (NYSE: SIL) has gained 12% since I said to buy in mid-January. SIL is a buy on dips.
At this point, silver could continue to consolidate, or it may even run higher first. Either way, it needs to close above $16 and make that its new floor. My next targets will be $16.25, then $16.50 once the silver rally is clearly back on track.
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