Silver Price News: Silver Fights the Headwinds

Like gold, silver has traded firmer (now c. $28.9/toz) in the second half of the week, presumably supported by the same combination of lower rates and a weaker dollar. In the meantime, however, recent real economic indicators have been mixed. While German July factory orders this week significantly exceeded expectations, US ADP (private) payrolls managed to undershoot very modest expectations. The current weakness in both global equity and commodity markets remains a broader indication of growth concerns.

Relief is currently in the pipeline. The Bank of Canada delivered on the rate cut expected this week and the ECB should do the same next, ahead of the Fed on 18 September. But such growth stimulus acts with a significant lag; silver peaked in May when incoming data was beating expectations. That simply isn’t happening now. We noted the critical importance of today’s US employment data in our Gold Forecast. This is also important to silver but note that weak numbers are associated with both lower rates and lower growth.

Silver’s technical position has much improved in recent days, with price action taking the metal back to both the rising 20-day Simple Moving Average and major horizontal resistance at $28.90/toz. On balance, momentum remains negative, though not egregiously so, with the standard MACD set to return to the green in coming days, absent a further significant down leg.

Should silver sustain a move above the current $28.90/toz resistance line, it faces ascending minor oblique resistance at $29.38/toz. Further resistance is indicated at $29.77/toz (major horizontal), $30.91/toz (descending major oblique) and $32.06 (major horizontal). Support is seen at $27.48/toz (descending minor oblique), $27.23/toz (ascending major oblique) and $26.20/toz (major horizontal).

Significant events for silver investors going forward includes US August Employment data and German July Industrial Production, both on 6 September.