Silver Prices Potentially Breaking Last Week’s Low On Today’s U.S. Inflation Report
The price of silver may turn bearish again on a break to last week’s low of $14.16. In this scenario, we could see price reaching the yearly low of $13.95, an outcome which is more likely today than yesterday as the EURUSD did slide below its weekly low and the DAX is 3.9 percent off its Monday low. Such positioning effectively shrugs off the fear following the very recent tragic events in Paris just last weekend. The increased risk-appetite is discouraging the holding of ‘safe-haven’ for metals such as silver. Whilst the slide in the EURUSD is helping to highlight that demand for the buck is high, it also helps to weigh in on silver prices.
We also want to point out that the market likes to hold stock markets when the global economy is perceived to be safe, as stocks gain in value and shares also pay dividends. Holding precious metals costs money and they are currently seen as dropping in value.
In the case that silver does not break last week’s low of $14.16, we would expect it to range trade between $14.16 and $14.48, with a break to the upper limit potentially triggering a rally towards $14.58.
U.S. CPI and Industrial Production on Tap
With risk appetite being strong, a soft industrial production will probably matter less for silver price traders. Instead, the focus should be on the U.S consumer price index. Headline inflation is expected to print 0.1 percent year-on-year according to a Bloomberg news poll. If this is the case then this will strengthen the case for the Fed hiking rate which is currently silver price negative. Core inflation is expected to print 1.9 percent YoY.
My own U.S. headline CPI estimate is less upbeat than the markets and with the average price of gasoline and core PPI prices declining over the last few months, I would expect inflation to be around -0.1%. If this indeed plays out as I expect, the silver price might just be able to hold back those bearish bets.
Silver May Reach $13.95 on a Break of $14.16
Created with Marketscope/Trading Station II; prepared by Alejandro Zambrano
--- Written by Alejandro Zambrano, Market Analyst for DailyFX.com
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.