While gold continues to struggle to find a catalyst, the price of silver made a notable move this week.
Silver prices are up almost 2% in the past week and nearly 3% in the last two weeks.
And that’s despite the dollar index being up over 100 basis points, or nearly 1%.
The most logical explanation is that weak hands are mostly done selling and bargain hunters have decided to step in.
While the gold-to-silver ratio best shows silver’s quick gain relative to gold, silver stocks have not kept up with the metal itself.
Here’s what both of these metrics mean for the price of silver looking forward…
Here’s Why the Price of Silver Is Rallying This Week
Silver spent most of the last week in further consolidation mode, faced with the headwind that was the Fed rate hike.
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That took the U.S. dollar higher on Thursday. From there it kept gaining, rising from about 94.3 all the way to 95.3.
Silver took a hit on Wednesday once the rate hike was official, then sank further on Thursday as the greenback gained.
Here’s how the DXY action looked over the past five trading days:
Thursday’s move lower was on the back of the euro falling. That pushed the DXY higher as concern over a possible delay for Italy’s budget proposal weighed on the currency. The dollar soared, taking the DXY to 95.3 by mid-morning, a 130-basis-point gain from Tuesday’s low.
Silver was beaten down on Thursday in the wake of euro weakness and a somewhat hawkish outlook from the Fed that rate hikes would continue into 2020.
But the most impressive move for silver came on Friday. Silver prices rallied strongly throughout the New York trading day, running up from about $14.28 to end at $14.64, producing a stellar 2.5% in just that trading session.
Now that the rally has begun, here’s my newest price target for the price of silver in 2018…
Here’s Where the Price of Silver Will Head Next
In silver’s case, the recent rally in the dollar doesn’t seem to have hurt it much.
The dollar index has rallied back up to the 50-day moving average. I think this level could hold as overhead resistance. If that’s the case, we may be seeing a near-term top in the dollar.
Monday’s announcement that the United States had reached a free trade deal to bring Canada into the fold along with Mexico seemed to help boost the DXY, which ran to 95.37 intraday. However, I think the downtrend could soon resume because of this news and the dollar’s relief rally.
Silver, meanwhile, is showing strong signs of revival.
The action in the silver price is being confirmed by both the relative strength index and moving average convergence divergence momentum indicators.
And the gold-to-silver ratio has shown a marked improvement for silver.
Its rapid drop from 85 to 81.5 is the proof. We’ll have to see if silver can maintain its recent pace of gains versus gold, but the bullish silver price action of late suggests that could be the case.
Looking at the silver stocks to silver ratio, we see it has dropped back recently.
This past week, silver gained but silver stocks declined. However, the new higher low for this ratio suggests another leg up could be in the cards. And if silver continues to climb, then there could be some pretty strong upside for silver stocks.
If the dollar starts to weaken and silver rises further, the $14.77 level at the 50-day moving average looks like an easy target, with $15 and $15.60 well within reach.
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