Can silver defend $19 again?

The price of silver has declined continuously since peaking at just over $21.50 per troy ounce at the start of July. At $19.00, silver is now just 40 cents shy of hitting April’s low of $18.60 and only 80 cents away from 2013′s trough at $18.20. The grey metal has been pressured above all by the recent weakness in gold prices (see figure 3) and the dollar’s strength. Unfortunately, there are no signs yet to suggest the two metals will decouple soon. Thus if the current trend continues, silver may go on to break below this key $18.20-$19.00 support range, a result which could encourage fresh selling from financial speculators. However, sentiment is not as bearish as had been the case in the previous times when the metal reached these extremes. So, a potential bounce back here may also be on the cards, especially as a long-term bearish trend has already been eroded (see weekly chart, in figure 1). In other words, there is the possibility we will see a protracted move in the price of silver soon. But which direction this may be is difficult to predict at this stage.

This post was published at TruthinGold on September 10, 2014.