Silver price gains as US Dollar drops

Monster rally in the price of silver. At time of writing, silver is up over 5% for the day.

The precious metals space is getting a nice bid as the US Dollar retreats after establishing resistance at 110. A dollar which will see more reaction after tomorrow’s CPI data print release, and the Fed rate decision next week. A weaker dollar means more continuation for silver.

On the daily chart for the US dollar, I am watching for a daily candle close below 108. If this occurs, we could see a dollar drop taking us down to 105. This would not just be positive for precious metals and other commodities, but will also buoy stock markets, cryptos, and currencies like the Euro and the British Pound.

Last week, I gave my analysis on the price of silver. I mentioned that our short targets from May 2022 were met when silver hit $18. This is a huge support zone and a weekly close below $18 does not bode well for silver.

As you can see, we did indeed bounce at $18. Now the question becomes: are we starting a new uptrend from this major support?

A lot of this depends on macro events and the US dollar. Personally, I am not yet sold on the dollar reversal. I see this as a pullback.

However, the technicals are presenting a bullish case. With today’s monster rally, silver is looking to close above the lower high at $19.25. I have drawn that out on the chart above. A lower high is what holds the current downtrend. When it breaks, it means the downtrend is over. Silver is looking very bullish according to this criteria.

Silver could pullback and retest this zone, but if we close below $19.25, then the momentum dies. I am now looking at the $21 zone as it is a major resistance area.

In terms of fundamentals it should be noted that silver at $18 means most silver miners aren’t making money because the price is lower than the cost of production.

In summary, it is still too early to call the bottom and a reversal. I would like to see some reversal pattern set up and this is what I will be watching for. Readers will be notified when I find that signal. The US Dollar drop is a pullback for now. For now, further Dollar pullback means more strength for silver. I would approach this as a trade.