Weekly Commodities Update: Silver

The flight to hard assets continues to dominate the landscape of the commodities sector, with precious metals reacting to a seemingly constant stream of global upheavals and uncertainty in the financial markets with a healthy acceleration of rising prices. Silver futures are once again flirting with the multi-year highs above $38 per ounce, after closing out a volatile month of March at the upper end of the trading range. 

Silver has been moving in close correlation with gold, as is normal in a strong metals bull market.  While much of what appears to be driving this rally can be attributed to headlines of geopolitical uncertainty and various short-term crises, it is likely that the long term support behind the rising prices will come from fears of inflation which are now beginning to seriously take hold in both the United States and Europe. With mounting public debts and stalled economies placing enormous burdens on central banks to continue printing new money, the inevitable result over time is likely to be much higher prices as the value of cash dwindles.

Silver, as both a hedge against inflation and an essential industrial metal, may eventually outpace gains in the rest of the complex by gaining value. By finding value as an investment asset as well as riding the general uptrend in the industrial materials caused by inflation, supply could be overwhelmed by demand for the foreseeable future.

Friday’s price action in the Silver futures appears to have been a “bear trap”, with the market briefly violating a minor trend line support on strong momentum before recovering near the close. This trend line support is part of a larger Triangle chart pattern, shown above on the hourly candlestick chart. This false breakout to the downside could become a major swing low in the market, as the closing price leaves Silver futures poised to exceed the previous high of $38.18 on any mild strength in this week’s trading.

A rally above $38.00 per ounce would confirm the reversal breakout, and establish an upside price forecast substantially into new high territory. A sell-off below Friday’s correction would bring the possibility of a correction back below the $36.00 level back into the picture. For now, the sharp recovery from the temporary pullback would lend weight to the market making a run at higher prices from here.

(Source: http://www.commoditiesmansion.com/commodities-news/weekly-commodities-update-silver/)