Silver Prices On A Tear, Should Be Trading at $15.30

Silver price are close to reaching our target of $14.90 as traders re-evaluate the prospect of more Fed rate hikes. I expect silver to reach $15.30 based on its correlation to gold and as long as gold prices trade at or above $1447.

From a technical and trading perspective I would expect to see a rise in the trend-defining level to the $14.14 low, and I imagine traders will use a pullback to the $14.50-30 range as an opportunity to add to their bullish exposure. On a break to the $14.14 level, the short-term trend will turn bearish and price may reach $14.

The Trigger

The latest trigger behind the rise in silver prices is the U.S. Non-Manufacturing index failing to meet expectations, printing 53.5 vs. the 55.1 expected. This may suggest that we are seeing a spillover of the soft manufacturing sector to the services sector, something which is spooking investors and causing them to not expect any further hikes in 2016. As of writing they only expect 14 bps of hikes in 2016, from 70 bps in December 2015 and I would expect this bearish sentiment to remain in place until traders receive stronger signs of the manufacturing sector stabilizing.

U.S. Jobless Claims are on tap today, and a Bloomberg news survey projects an outcome of 277K. Factory Orders are also on tap and expected to soften by 2.8% MoM. Given the bullish trend in silver prices and the relatively low importance of these indicators, I doubt they will be able to shift the silver price trend to bearish. More likely a scenario is that traders will use a dip to add to their long exposure as long as silver prices don’t slide below the $14.14 low.

Silver Prices | FXCM: XAG/USD