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Talking Points

  • Silver prices are drifting lower, and the trend is bearish below the May 20 high of $16.63.
  • The driver behind the latest few days of decline in silver has been a speculation that the Fed will hike rates in June.
  • Today, U.S. New Home Sales may gain by 2.3% MoM from a decline of 1.5% in March. However, the outcome of the report may have a limited impact on the price of silver, given that it’s not a crucial part of current Fed monetary policy.

Silver prices are short-term bearish below the May 20 high of $16.63, and the trend is bearish below this high as it’s a lower high in relation to the previous high of $16.90 formed on April 19. In a downtrend similar to the current, the norm is for price to drift lower, creating lower highs and lower lows, according to classic technical analysis.

A near term resistance level is the high of $16.43, formed yesterday afternoon in London. Support levels are today’s London morning low of $16.21, followed by the April 18 low of $16.09.

Our forecasts for Q2 2016 are live on the site. Download them for free.

Silver Price | CFD: XAG/USD

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

The driver behind the latest few days of decline to silver prices is speculation of a Fed rate hike in June. According to Fed Funds futures, the likelihood of a June 15 rate hike is now at 32 percent, from being near 4 percent less than two weeks ago.

Adding to the speculation of further rate hikes were yesterday’s comments by Federal Reserve Bank of Philadelphia President Patrick Harker, when he said he could ‘easily see two, three rate hikes in 2016’. Comments by Fed member Williams, where also perceived as hawkish, while comments by Bullard were more balanced.

Today, U.S. New Home Sales may have gained by 2.3% MoM from declining by 1.5% in March. Looking at the actual number of new homes sales, the expected outcome is for a rise from 511k to 523k. The trend has been upwards since 2011, when homes sales reached a low of 267k. As this indicator is currently not a major component of Fed monetary policy, the impact on silver prices may be limited.

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

Contact and follow Alejandro on Twitter: @AlexFX00