A New Target for the Price of Silver

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December 11, 2018 2:03pm NYSE:SLV

silver coins

From Peter Krauth: There’s no question the price of silver has made some bullish moves this week.

The silver price has climbed by 3% over that time, aided by a weak U.S. dollar and markets, both of which have also been suffering from growing volatility.

Meanwhile, the S&P 500 has given back a stunning 5.7% in the last week and is actually in the red on a year-to-date basis.

Some currency experts think the dollar might struggle next year, as the U.S. faces a possible economic slowing. That could prompt the Fed to pause its rate hiking sooner than expected, making the dollar relatively less attractive.

Even so, silver’s recent behavior in the face of a rising dollar has been stellar. Read on for my analysis of just how well silver prices have held up against the greenback.

How the Price of Silver Is Trending Now

Although silver started out last Tuesday (Dec. 4) with an impressive rally, it was mostly thanks to a temporary bout of dollar weakness.

The dollar managed to bounce back, with the DXY hovering around 97.10 most of Wednesday, then backpedaled to consolidate near 96.8 most of Thursday. Silver had weakened into early Thursday, when the DXY finally stabilized, and silver bottomed that morning at $14.36.

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From there, the price of silver rallied to end the day at $14.44.

Here’s the U.S. dollar index’s action for the last five trading days:

silver prices

As the DXY’s sell-off bled into Friday, silver prices enjoyed more strength, rallying to end the week at $14.58.

Then on Monday, the markets managed a strong reversal after early selling, with the S&P 500 closing higher than Friday’s close. That was accompanied by new dollar strength, pushing the DXY up to 97.2 by day’s end. That weighed on silver, which backed off from Friday’s levels to close at $14.50.

Here’s where I think the price of silver will head now…

Here’s My Newest Price Target for the Price of Silver in December 2018

U.S. dollar action continues to remain challenged, with weakness relatively persistent.

price of silver today

The trend I highlighted for you last week has remained in place. The relative strength index (RSI) and moving average convergence divergence (MACD) momentum indicators continue to trend downward, and the DXY itself has done the same.

This is particularly interesting, given that the Fed is widely expected to announce a rate hike next week. Either the market is starting to realize that was already priced in, or it’s starting to doubt the likeliness of a hike for December.

Silver has typically rallied at the last several hikes, and in particular at the last three December hikes in 2015, 2016, and 2017. I’m expecting the same this time around. But if the Fed blinks and doesn’t hike rates, all bets are off. I think silver would soar, as the dollar would likely get crushed.

Now let’s look at silver itself.

silver prices today

While silver still remains within its trading range of $14 to $14.75, it’s been above its 50-day moving average lately and approaches overhead resistance.

Silver’s RSI and MACD have both been trending higher for the past month or so, while silver has managed to establish a series of higher lows.

Now that silver has cleared the $14.50 level, it really needs to hold it, then reach for $14.75. And looking at the 200-day moving average, we can see it currently touching my next target level of about $15.50.

Like I said earlier, I’m really impressed with how silver has behaved in the face of a robust dollar index.

Consider that the DXY’s last high occurred on Nov. 12, reaching 97.54. On that day, silver weakened to close at $13.98. Since then, the DXY has of course bounced around quite a bit. But on Monday, the spot DXY was at 97.21 by 5 p.m., and yet silver had risen to $14.50. That’s a considerable gain for overall modest weakness in the dollar, suggesting that silver may finally be gaining some traction to rally higher.

I think investment demand for silver will start to become a bigger driver of the metal’s price.  And I expect renewed market volatility, and a greater recognition that we’re nearing the end of the current economic expansion, will make silver increasingly attractive to investors.

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The iShares Silver Trust (SLV) was trading at $13.66 per share on Tuesday afternoon, up $0.01 (+0.07%). Year-to-date, SLV has declined -14.57%, versus a -0.69% rise in the benchmark S&P 500 index during the same period.

SLV currently has an ETF Daily News SMART Grade of C (Neutral), and is ranked #9 of 35 ETFs in the Precious Metals ETFs category.

This article is brought to you courtesy of Money Morning.

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