The silver market has seen a sharp drop on Wednesday, as traders continue to see a lot of sharp moves, with concerns about industrial demand.
Silver
The silver market witnessed a quick and sharp drop during the trading session as the hotter than anticipated PPI numbers in the United States has effectively crushed near term Federal Reserve rate cut expectations. To be honest, I don't really know who would be thinking that it was coming. In fact, the Federal Reserve is more likely than not to be cutting rates between now and December.
Despite the ongoing safe haven bid from the Iranian conflict, the surge in the US dollar and higher real yields are acting as a heavy weight on non-yielding assets such as silver and also gold. Silver has been underperforming gold for a while as the gold to silver ratio widening towards 63 shows as fears of inflation driven slowdown weigh on industrial demand component, particularly in the solar and EV sectors.
Technical Resistance and Range-Bound Support
That being said, this is a market that has been rangebound for a moment and the $70 level under is going to continue to be an area that a lot of people see as a floor. The 50-day EMA sits just above and if we were to break above there then it could open up the possibility of testing resistance at $90.
Quite frankly, the $80 level has been a bit of a magnet for price and with that being the case, it wouldn't surprise me too much to see this market turn around and rally towards that area. But I also recognize that we are pretty lackluster here and with all of that being the case, I just don't see a situation where you are looking for some type of external pressure to send silver higher.
I do think eventually we will see it but we clearly won't have it now and if there is a runaway from risk appetite, we could see silver suffering a little bit more. I have a very neutral outlook on silver at the moment with maybe a slightly bearish bias, but I would highlight the word slight.
Potential signal: IF, and I mean IF we break $80 to the upside, I would be a buyer for a short-term position. I would have a stop loss of $1 below the entry, and aim for $83.20.