Silver Fails At $15, But It's Still Within Striking Distance

June 16, 2019

New York (June 16)  While gold is the leader of the precious metals sector, silver is the metal that tends to move the most on a percentage basis when it gets going on the up or the downside. Silver also has a long history if igniting the passions of market participants. The Spanish empire became the richest on the face of the earth after discoveries of silver reserves at Cerro Rico in the Potosi mines of Bolivia. The mountain was responsible for 60% of all silver production during the second half of the sixteenth century. The 1898 Presidential election in the United States was a contest between William McKinley, who supported a gold standard for the US currency, against William Jennings Bryan who preferred a silver standard. In the late 1970s, the infamous Hunt brothers attempted to corner the silver market, but they wound up making a small fortune, from a large one.

Since December 2015, the price of silver has traded in a range from $13.635 to $21.095 per ounce. The 2015 low was the bottom after the silver futures market dropped from a high at $49.86 in 2011, which was just shy of the all-time high from 1980 at over the $50 per ounce level. On June 13, silver was sitting below $15, a lot closer to the low than the high over the past three and one-half years. Before 2015, the last time silver traded below $13.635 was in 2009, so silver is not far from the lowest price in a decade.

The price of the metal has been declining since July 2016, and with silver a lot closer to technical support than resistance, the odds seem to favor a lower price for the metal. However, it would be just like the volatile silver market to defy the odds and blast off to the upside. If silver is heading higher, the chances are that the miners around the world who extract silver from the crust of the earth will appreciate even more than the price of the metal on a percentage basis. The Global X Silver Miners ETF product (SIL) holds shares in some of the world's leading primary producers of the precious metal.

Silver broke a bearish pattern on the daily chart

On Friday, June 7, the price of silver rose to a price that ended a bearish trend in the silver futures market that had been in place since late February.

Click to enlarge 

The daily chart highlights, the price of the active month July silver futures rose to a high at $15.15 on June 7 which was the first higher high since February when the price peaked at $16.385 on the July contract. The previous lower high was at $15.12 on April 26. Silver pulled back to the $14.80 level as of last Friday. The daily chart shows that price momentum and relative strength were both at the higher region of neutral territory. Open interest, the total number of open long and short positions in the COMEX silver futures market has been rising steadily since May and was at over the 233,500-contract level at the end of last week. The rise in the metric is a sign that sentiment is turning bullish for the price of the precious metal. However, while gold rose to a new high on June 14, silver fell three cents shy of its peak from June 7 which is a continuation of the recent price action in the precious metals sector.


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