Bullish traders continue to push the silver market higher despite the fact that the market gapped lower to kick off the Monday session. Ultimately, this is a question of whether or not higher interest rates and a stronger U.S. dollar are coming, or if silver can find its way back into favor when it comes to the rest of the market.
Currently, we are seeing the Silver market trade right around the 200-day and 50-day EMA moving averages. This is a sign that the market is trying to determine where to go next, and with all of the confusion, this shouldn’t be a huge surprise, with the unending amount of headlines in focus.
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Ultimately, this is a market that is trying to determine its next move
The market has been range-bound for a while. Silver is being influenced by higher interest rates coming out of the United States, as energy inflation is a major concern. The U.S. economy seemingly not being able to slow down drastically has also played a part in this scenario.
The market has been trending sideways between $60 on the bottom and $70 on the top for some time. Quite frankly, it does not look like that attitude is going to change anytime soon. That being said, though, if the market were to break above that $70 level, it could change everything. It would probably not only be a good sign for silver, but probably a bad sign for the U.S. dollar.
On a break lower, things could change
Alternatively, if the market were to break down below the $60 level, that would obviously be very negative for the silver market. It could open up a much deeper correction. This isn’t as likely in my opinion, but it is something that needs to be thought about.
Longer term, silver is a market that is a supply-and-demand story. But in the meantime, we also have to worry about the noise coming out of the Middle East, and that has been a major problem. It allows for the market to misbehave at times, as it were, with the reality being that even though there is much more demand for silver than there is new silver coming online, it does not mean that price will behave accordingly.
Quite frankly, it is easier to buy paper in the form of bonds that have a yield than a non-yielding asset like silver in this environment. Ultimately, traders will have to watch not only headlines coming out of the Middle East and interest rates coming out of places like the United States, but they will also have to ask themselves about risk appetite and whether or not the U.S. dollar is performing well or if it is starting to slip because of the known negative correlation. This isn’t always 100% correct, but in general, the rising dollar is a problem here.
In other words, we are still juggling a lot of different pieces at the same time to try to determine what happens next, not only in the silver market, but in markets in general. This is a constant state of uncertainty, and I just don’t see that changing soon.
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