The silver markets has a fairly volatile five sessions as the world tries to solve the idea of what is going on in Europe, China, and the United States. While the Dollar rising in value can work against the value of silver in general, the fact that silver is used for so many industrial applications makes this market a bit more difficult than gold to gauge at times. On one hand, the Dollar fell for the session on Friday, but one still has to be leery of the industrial demand for silver and other such commodities.
The demand for silver will certainly be under assault as the Chinese are slowing down, and the Europeans are going into a hard recession in some countries. Simply put, there won’t be a lot of trade going on. With the problems in Europe, we suspect that there will be a somewhat continued move into the US dollar, and this will continue to weigh upon the precious metals complex. The $30 level looks to be our “trigger point”, meaning that the market is a screaming buy above that level for us. On a daily close, we would be long.
However, looking at the other side of the trade, there is the $27 level that would have us aggressively selling silver as it would show another leg down in this market. The move down would probably be fairly brutal at that point as the momentum will certainly have shifted to the downside at that point.
The market is essentially stuck in a $3 range for our money, and as a result we may be flat for some time. However, once one of those levels gets broken, it will become obvious to many that the market is getting ready to move again. As this market can move rather wickedly once it makes up its mind, it is probably best to wait until the signal is obvious before getting involved.
While there are some who will choose to trade within this range, we wish them well. The volatility in silver at the moment is far too strong for us to risk our capital on.