Last Friday, July silver closed down 1 cent, or 0.05% at $22.50 an ounce. Prices saw a 0.6% gain on the week. Many traders tend to believe that the price bottomed out last week, after reaching $20.25 on ounce briefly. Current 52 week low is $20.25, while high is $35.30 an ounce.
The probability of another strong downside move, followed by a strong upside reversal seem unlikely. In fact, as long as silver respects the $22.75-$23.05 resistance region, silver may drop down to make another low in the same fashion as we saw last week, followed by an even stronger rally than we saw last week. In all cases, such movements indicate a renewed interest from market participants and opportunities to make or lose profits in the range of 10%.
If silver is able to move through the $23.05 level, it would be more likely that prices are heading up to the $26 – $27 region, which is somewhere beween 10% and 20% advance from the recent levels. However, another larger decline in the white metal’s price is very much possible in the coming summer months.
Many investors seem to believe that the metals are “safe haven” asset when there is turmoil in markets around the world. Last Thursday, a turmoil unfolded in Japan with the markets taking a 10% haircut in a matter of 24 hours. In correspondence, silver rallied. It went from $20.25 all the way to $22.62, a good over 10% change in a matter of hours.
US stocks were little changed Friday afternoon in the midst of more turbulence for Japanese stocks. Fresh data showed some lift among American manufacturers as durable-goods orders rose 3.3% in April against expectations for a rise of 1.4%.
In addition, a significant divergence in the overnight markets between gold and silver was observed. In terms of silver, there is a significant difference in the overnight performance compared to the US performance. Traders may decide to use this to their advantage, though investors should not try to trade these performance differentials because they could lose a lot of money in the case of sentiment shift.
However, once overnight sentiment changes, silver price may enter a recovery mode. The last time such weakness in overnight silver versus US silver trading was observed in 2009 – right before the spectacular rise in silver culminating in $49 per ounce in 2011.
Please don’t use the term ‘haircut’. It’s insulting to all the people who got screwed over in Cyprus. It was a flash crash so call it that.
You kind of covered your bases by saying silver may rise but silver may fall in the one paragraph.
Point taken! We are far from Japan and not that far from Cyprus, and therefore is hard to associate with the painful losses of market participants over there.
And Yes, silver is extremely volatile and you can make quick profits, if you are focused on your screens nearly 24/7. However, this is a hard task to maintain over a long period of time.