Will Gold Bring Silver Down?
???? Fundamentals
Silver futures have been linked to Gold, which suffered a setback after two major hedge fund managers indicated they were either abandoning or lightening their positions in Gold ETFs. Weaker economic activity has also weighed on both metals, and Silver could actually be the more vulnerable of the two, given that its value has held up better at this point, as well as its industrial nature.
Silver is at one-month lows, whereas Gold finds itself at six-month lows. Inflation has been contained, indicating that Silver prices could feel pressure, even in the event that economic conditions do improve, as safe haven demand could suffer.
The G20 meets this weekend in Moscow, which can be seen as a wildcard event. If there are currency war overtures, where members attempt to weaken their currencies to gain a competitive advantage, inflation could become a major concern. Currency devaluation can give an economy a short-term boost, but can also create an uncontrollable beast in inflation.
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???? Technical Notes
Turning to the chart, we see the March Silver chart falling below minor support at the 30.90 level. The Silver chart also shows a downside breakout from a triangle pattern, suggesting prices could possibly come down and test levels in the 26’s.
The relative low close of 29.61 is the next downside test, and failure to hold this level could bring a few waves of short selling and long liquidation. Currently, the RSI remains neutral, despite the recent selling pressure, which is a divergence from both price and momentum.
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