FUNDAMENTAL OVERVIEW
The strong bullish momentum seems to have waned for precious metals and silver is getting hit the most given its smaller market compared to gold. It’s not clear what caused yesterday’s drop as pretty much all markets went down at the same time. There were only talks of multiple US warships arriving in the Middle East but given that oil prices dropped too, I wouldn’t bet on that reason.
Overnight, we got reports that Trump was going to announce his Fed chair pick today and everything suggested that it was going to be Kevin Warsh. We got a hawkish reaction across markets as Warsh was a hawk during his last term at the Fed, although the historical stance is never a guarantee.
The narratives underpinning silver in the past several months have been the same as for gold, that is de-dollarisation, geopolitical tensions, and so on. Given the lack of bearish catalysts, the price continued to rise just by inertia. We reached a point where it looks like just FOMO rather than something fundamental because these prices are not justified in the short-term.
Since last week, I’ve been turning more bearish in the short-term as I feel like we are reaching an inflection point and February could be the first major negative month for precious metals if the right conditions fall in place.
The most important catalyst next week could be the US NFP report. We’ve been seeing improvements in the US Jobless Claims data that seem to suggest a pickup in labour market activity. A strong report would trigger a hawkish repricing in interest rate expectations and put pressure on silver.
The other top tier data could also start to weigh on silver if they come out strong, but the NFP report should be the main event of the week. In case we don’t get the bearish catalysts, silver could resume its upside trend.
SILVER TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see silver dropped by more than 20% since yesterday as profit-taking hit the market. From a risk management perspective, the buyers will have a better risk to reward setup around the major trendline to target new record highs. The sellers, on the other hand, will look for a break lower to extend the selloff into the 70.00 level next.
SILVER TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can see that the price broke below the trendline that was defining the bullish momentum on this timeframe. This is generally a signal of a loss of momentum and potentially a bigger pullback. The sellers will likely step in around the broken trendline with a defined risk above it to keep pushing into the next trendline. The buyers, on the other hand, will look for a break higher to start piling back in into longs and target new record highs.
SILVER TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we can see that we have a minor downward trendline defining the current bearish momentum. The sellers will likely lean on the trendline to keep pushing into new lows, while the buyers will look for a break higher to increase the bullish bets into the next downward trendline around the 110.00 level. We can also notice that the price is trading at the lower bound of the average daily range for today. In such instances, we can generally see a consolidation or a pullback before the next move.
UPCOMING CATALYSTS
Today we conclude the week with the US PPI report and Trump’s announcement of his Fed chair pick.
