Silver Should Be Trading At $13.95
The better than expected economic data lowers the demand to hold silver as a safe haven and routes capital to stock markets, thereby capitalizing on the better than expected economic growth. The better economic data also increases the likelihood of a stronger USD, which is bad for silver prices. For now I see it as a matter of ‘when’, rather than ‘if’ we get a fresh 2015 low for silver. I am happy to hold this view as long as prices remain below $14.40.
Gold as an example traded lower on Friday and using linear regression over the last 6 months we are able toconclude that Silver prices should be trading near $13.95. Using a whole years’ worth of data suggests thatsilver should be trading at $13.88, with that figure set to $12.99 when using 2 years’ worth of data.
Given that silver is trading close to the $14.40 key level, the biggest risk to my bearish silver view is the upcoming ISM Manufacturing, ECB rate meeting, and U.S. Non-farm Payrolls. Soft U.S. data may trigger a reversal, while the ECB meeting may trigger a general reversal in the USD as traders book profits in EURUSD. In the long run the outlook for silver remains bearish.
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Technical Outlook
The November 20 high of $14.40 is capping price and traders will most likely short in the $14.14 to $14.40 range with stops above $14.40. A successful reversal will most likely take price to $13.80 and then $13.50 in the long run.
Created with Marketscope/Trading Station II; prepared by Alejandro Zambrano
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