Silver Rally: For Real This Time?
Silver Rally: Buy It… Or Sell It?
Believe it or not, the past few days have been rather kind to silver market bulls. After an abysmal summer of trading under $15 an ounce, the lustrous metal has advanced 10% since October 2nd, closing just shy of $16 in yesterday’s trading session.
Here’s a chart…
As you can see, silver has rocketed off multi-year lows the past few days. Months of choppy, sideways trading action has given way to a rally reminiscent of the metal’s glory days of 2011.
What’s sending silver galloping to higher ground?
Some of the recent rally has to do with the Federal Reserve’s recent decision to forgo raising interest rates.
With global economic growth becoming decidedly less certain, the US Central Bank may be backtracking on their plan to bring rates off 0% for the first time in six years.
Here’s the deal…
Their mid-September decision, or lack thereof, has some analysts asserting they’ll never raise rates at all. In fact, a number of fringe analysts foresee the Fed implementing another round of quantitative easing (QE) in 2016.
While I don’t embrace this conspiratorial viewpoint just yet, there’s a rather compelling argument to be made in its favor.
But I digress. Let’s save this captivating idea for another day.
Now, despite the assertions of the “QE forever” crowd, here’s what’s really responsible for the recent silver upturn…
As you can see from this long-term chart, the price of silver has finally dropped to the 200-month moving average (red line). This important line of technical support has silver buyers entering the market, pushing prices higher.
Of course, that brings up a couple of essential questions…
Will the 200-month moving average provide a price floor for silver- possibly sending it above $20 an ounce in the near future?
Or will bears eventually retake the market, sending the metal toward $10 an ounce?
Let’s look to another chart for some answers…
If (and that’s a BIG IF) silver can surpass the 200-day moving average (red line) and the technical downtrend (green line) from the 2015 swing highs, then I’ll get excited about additional upside.
But until then, it’s best to stick to the sidelines, or even short rallies in the metal.
How do you capitalize on the situation?
Silver ETFs offer investors an incredibly easy and efficient means to trade the silver market, without the need for a complicated futures account.
Until Next Time,
Justin Bennett
BIO: Justin Bennett is the head commodity research analyst at Commoditytradingresearch.com. With over a decade of real world trading experience, he finds ways for you to consistently profit from movements in commodities and the companies producing them. Sign up for our free reports and commodity newsletter at https://commoditytradingresearch.com/free-sign-up.
Category: Precious Metals, Silver
