FUNDAMENTAL OVERVIEW
Silver extended the gains into a new record high today following the news of the US Department of Justice subpoenaing the Federal Reserve. This is just another attack on Fed independence as the White House continues to seek pretext to fire Fed Chair Powell.
We have already seen this kind of intimidation with Fed Governor Cook last year when Trump tried to fire her for cause without success as we continue to await the US Supreme Court decision on that case.
Silver rallied on the news because a potential loss of Fed independence increases the risk of higher inflation in the future and US Dollar debasement. The probability of the loss of Fed independence remains very low though as the consequences would be too big not only for the US but the global economy as a whole.
Tomorrow, the focus will turn to the US CPI report. We got a good NFP report on Friday, with the unemployment rate falling to 4.4%. A January Fed rate cut is now out of the question, but the market still sees two rate cuts by the end of the year, with the first one expected in June. A hot inflation report might trigger a bit of a hawkish repricing and weigh on silver in the short term. On the other hand, soft data should keep on supporting the upside.
In the bigger picture, silver should remain in an uptrend as real yields will likely continue to fall amid the Fed’s dovish reaction function. But in the short term, a hawkish repricing in interest rate expectations could weigh on the market.
SILVER TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that silver bounced on the trendline and extended the rally into a new all-time high today following the DOJ news. There’s not much else we can glean from this timeframe as the best spot for longs in terms of risk/reward was around the trendline. We need to zoom in to see some more details.
SILVER TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can see more clearly the break into new record highs today. The previous all-time high around the 82.68 could act as support now. We can expect the buyers to step in around these levels with a defined risk below the 82.68 level to keep targeting new highs. The sellers, on the other hand, will want to see the price falling back below the 82.68 level to position for a drop into the major trendline.
SILVER TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we can see that we have a minor upward trendline defining the bullish momentum on this timeframe. From a risk management perspective, the buyers will have a better risk to reward setup around the trendline to keep pushing into new highs. The sellers, on the other hand, will look for a break lower to increase the bearish bets into the major trendline next.
UPCOMING CATALYSTS
Tomorrow we have the US CPI report. On Wednesday, we get the November US Retail Sales and US PPI reports, so it’s going to be old data. We also have a potential US Supreme Court decision on Trump’s tariffs. On Thursday, we get the latest US Jobless Claims figures.
