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Silver Price: Safe-Haven Flows Get Hammered

Silver Price: Safe-Haven Flows Get Hammered

2016-01-04 17:00:00
Alejandro Zambrano, Market Analyst
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  • Silver remains bearish, despite the plunge in stock markets
  • As long as the $14.40 is capping price, I would expect silver prices to reach $13.65 and $13.18.

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Today, silver prices rallied briefly, breaching the post-Christmas holiday highs of $14.05 before plunging back to its range. The trigger behind the surge in price was equity markets falling on the soft U.S. ISM (48.2 vs. an expected 49) and a poor Chinese Caixin Mfg. PMI (printing 48.2 vs. the 48.9 estimated).

This boosted demand for silver and gold on safe-haven flows. However, for now it appears that this was nothing more than a short-lived rally as the demand for U.S. Dollars was higher than for sliver. We note that the USD gained vs. the Euro, GBP, CHF, AUD and NZD.

From a longer-term technical point of view however, the outlook for silver prices has not changed. The overall trend remains bearish below the December 28 high of $14.40. A break to this level is needed for bullish traders to take control of the price. Until this happens, it may still reach the December low of $13.61, and eventually break this level, triggering a decline to the July 27 2009 low of $13.18.

Looking at the haven flows, they may re-emerge in the days ahead if the S&P 500 manages to successfully break its December 14 low of 1993. For now such a move would make sense given that U.S. ISM was soft and points towards a further slowdown for the U.S. economy. However, for now it appears that investors prefer USD over silver, hence, a surge in risk-aversion may not boost silver prices.

Silver / XAGUSD

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Created with Marketscope/Trading Station II; prepared by Alejandro Zambrano

--- Written by Alejandro Zambrano, Market Analyst for DailyFX.com

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