Yesterday, we highlighted the
possibility for gold to rebound from a key support area as prices looked oversold and the dollar fell to a new multi-year low. Well, today gold has surged higher, with a gain of over 2% at the time of writing. Meanwhile, silver has done even better, rising 4% to a high so far of $23.70ish.
The Dollar Index remains near its recent lows, thanks to the ongoing rally for the euro and commodity dollars. If the weakness for the dollar persists, this should help to support precious metal prices, even if government bond yields have rebounded slightly. But for silver, the higher yields shouldn’t be too much of a headwind, because the grey metal is deemed to be a more risk-sensitive metal than gold. With stocks and other risk assets rallying, the grey metal should outperform the yellow metal as hopes rise over demand for industrial materials such as copper and silver.
Meanwhile from a technical point of view, silver still needs to clear THIS shaded region before the bulls can become more confident about the sustainability of the rebound:
Source: ThinkMarkets and TradingView.com
The above shaded region marks a prior support zone, now potentially resistance. Here, we also have a short-term bearish trend line coming into play. There is a longer-term trend line slightly higher, which needs to give way before the long-term uptrend can objectively resume.
Meanwhile, in terms of support, the head of Monday’s hammer candle at $22.70ish needs to hold if price returns to this level in the coming days. Otherwise, silver could suffer a deeper correction as leveraged longs who bought this week’s rally will be forced to exit their trades.
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