Silver Trading Markets Feeling Pressured
Silver had reacted negatively to Federal Chairman Ben Bernanke’s gloom and doom speech yesterday as many of the other markets. The US Dollar Index has been under pressure with all the lackluster economic reports. The Silver Market really has been pressured as an industrial metal reacting to a slowed global growth and possibilities of pauses in manufacturing and production. The weak US Dollar however has led to increased exports and export demand.
The role of the Silver Market is more than just an industrial metal and traders still look to the Silver Market as a safe-haven currency. Certainly, the increased margins have kept traders away from the precious metal, but the margins may be coming down as the volatility subsides. Fitch’s came out with a warning that the possible default of the US in light of the abundant debt, may drop the AAA rating. Foreign investors contribute by allocating to our debt instruments, the appeal of the US is contingent on the financial strength. While many US economic reports lately have been less than perfect, the anticipation for a stronger second half of 2011 lifts the sentiment.
Positive factors for Silver!
- The earthquake in Japan not only hurt our auto manufacturers, but high-tech firms out of Dallas and Boston had delayed shipments of products outsourced to Japan. As manufacturing and production pick up, we expect the Silver Market to move up as well.
- Mining companies have suffered the high cost of doing business with energy prices escalating to well over $100.00 in the case of the Crude Oil.
- Silver can attach itself to other markets such as the grains as the USDA may release a bullish report for the Agricultural products, the exhilaration may sweep up the metals as well.
- Weakness in the US Dollar often can make the products such as Silver more appealing to investors.
- The Silver Market is often used as a hedge against inflation.
- Bullion demand may rise as uncertainty pulls investors to safe-haven products.
- ETF and Fund activity may stimulate further rise in the Silver.
Negative factors for Silver!
- Strength in the US Dollar can make it more expensive to invest in the Silver Market.
- The potential rate hike in the Euro Zone can potentially suppress the Silver Market.
- Cost of mining production going down could increase production.
- Margins may stay inflated.
While we hate to see a washout in the marketplace, occasionally they are only a reflection of the previous move. Retracements are a necessary part of the equation. After all, that is a reflection of the Fibonacci Retracements. The margins may prohibit traders from taking the futures positions, but the options may be a way to garnish the benefits of the increased volatility and define a prescribed risk for the trade.
Technically speaking!
The July Silver contract had hit a high of $49.845 and just seemed to back off of the $50.00 target that many analysts had touted! We have retraced and perhaps are ready for another leg up! There may be overhead resistance at $38.00 – $40.00.
~Silver Chart~
We look for support at $34.27 and we see this market in buy mode! Look for entries on the dips and trail the stops.
It is suggested to always keep a stop-loss on a position immediately after it is entered. It is also suggested to stay alert and focus to stay Silver Savvy!
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
