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Silver Chart and Comments

Dan Norcini
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Friday, May 11th

Silver continues to be the poor poster child for the Deflation or Risk Aversion Trade. It's chart is abysmal at this point as it has steadily retreated since peaking near $50 in what seems a lifetime ago. About the only positive thing that can be said about it is that is had not been below the $26 level for some time now. That level still seems to be bringing in buyers.

Unless something changes rather drastically over the next week, it looks like it is going to once again test the resolve of those buyers that have been busy down there. If it holds, fine; if not, it would get rather ugly for silver.

One thing about it is that it has already seen a rather large exodus of speculative money from the long side of the market. It will take fresh short selling to break it down below $26 therefore. The key question is when will the market psychology shift away from deflation back to inflation? My view is that it will not UNLESS and UNTIL the monetary authorities give a credible hint that the QE punch bowl is going to be brought out soon.

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