Skip to Content
News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

Free Trading Guides
Subscribe
Please try again
Select

Live Webinar Events

0

Economic Calendar Events

0

Notify me about

Live Webinar Events
Economic Calendar Events

H

High

M

Medium

L

Low
More View More
Silver May Rally If Correlation to Gold Kicks In

Silver May Rally If Correlation to Gold Kicks In

Alejandro Zambrano, Market Analyst

Share:

Silver prices are little changed today despite elevated risk-aversion and gold prices being close to breaking their December high of $1088.80. If gold does break its $1088.80 high, it can be expected that the trend would turn bullish, and this would suggest that silver prices should also be trading higher.

If it was down to gold prices exclusively, a regression model (based on daily prices over the last 6 months) suggests that silver should be trading at $14.38 (currently at $13.99). In other words, silver is in desperate need of a catch up with Gold and would be close to breaking its downward trend.

This can be used by traders that are looking for silver prices to catch up with gold. These traders would use the January 4 low of $13.77 as a base for their bullish view.

The alternative scenario (and my main scenario) is for Gold to remain capped by the $1088.80 high and for traders to keep buying the dollar despite an economic slowdown in China, as suggested by this week’s disappointing PMI Mfg. and PMI Services figures. This would make more sense as at this stage, the Fed would probably need to see a softer labour market and inflation not picking up before it reverts to raising rates further. This I something I think today’s FOMC minutes will echo.

With this in mind, I expect that traders will most likely opt to fade a rally near $14.25 with stops above $14.40. On a successful break to $14.40, silver may reach the December 2015 high of $14.62.

How do you know if a trade is good or not? You could use the risk-reward ratio as outlined in the The Traits of Successful Traders Guide.

Silver | XAG/USD

Please add a description for the image.

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

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

Contact and follow Alejandro on Twitter: @AlexFX00

Learn more about trading and join a London Seminar

To be added to Alejandro’s e-mail distribution list, please fill out this form

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES