Today's silver price is pulling back, down about $0.20 to around $14.35, following what turned out to be a wild but positive week...
As we worked our way through the last five trading days, silver prices ended up slightly underperforming gold each day except Wednesday, and even then, not by much. On Thursday, while gold managed a moderate bounce thanks to short covering, silver couldn't muster sufficient strength to avoid hitting a six-year low.
But the standout day for the silver price ended up being Friday, a positively exciting day for any gold and/or silver watcher...
Today's Silver Price Follows Crazy Friday Move
That's when both gold and silver prices exploded higher just after 8 a.m., with their proxy exchange-traded funds (ETFs) SPDR Gold Trust (NYSE Arca: GLD) and iShares Silver Trust (NYSE Arca: SLV) gapping massively higher.
Here's a chart to help you see just how last week's silver price trended:
On Friday alone, the SLV ETF opened a full 1% higher and kept going up to 3% higher in a matter of 45 minutes. Of course, it was simply mimicking, as it should, the spot price for silver.
Here are some of the drivers that led to this kind of action.
What Moved the Silver Price Last Week
U.S. Federal Reserve Chairwoman Janet Yellen had been talking up the probability of a December rate hike earlier in the week, providing the Fed's standard forward guidance (or manipulation...).
That buoyed the U.S. dollar which, of course, weighed on silver.
But on Thursday, as European Central Bank chief Mario Draghi announced that he would lower deposit rates by 0.1% and extend (but not boost) its bond-purchase program, the euro bounced due to the lack of easing expected by the market.
The dollar sold off pretty sharply, which is why gold saw a gain, but that simply didn't translate to the silver price, which hit a six-year low.
But the week, and the action, were not over yet.
Silver then surged on Friday.
Mario Draghi recently spoke at the Economic Club of New York and told his audience that the ECB stands ready to expand its stimulus program if necessary.
Those comments had the intended effect of pushing back down the euro, which had risen by 3% the previous day.
As the November jobs numbers rolled in, the market reacted favorably.
My take is the market was reassured that Yellen would raise rates later this month, thereby removing the uncertainty surrounding that move.
That seems to have lit a fire under both gold and silver prices, both of which also seem to be in a process of short covering.
Another Boost for Silver Prices
Meanwhile, we got news earlier in the week that the U.S. Mint had broken last year's annual record for American Eagle silver coins. So far this year, 44,666,500 ounces have been sold, versus last year's 44,006,000 ounces. The latest data show that November sales were 27% higher than in October.
While estimates vary widely depending on who you ask, there seems to be little disagreement that we are facing another year of supply deficit in the silver market.
And that perhaps is what will be one of the biggest drivers for the silver price as we head into 2016.
That, along with a great technical setup, could have us see a potentially dramatic silver price surge.
You see, given the recent sell-off in silver that lasted from late October until last Thursday, we now have three strong data points that indicate a sizeable move up.
The relative strength indicator (RSI) has just surged from under 30 to over 50 in a single day.
Then we have the silver price itself, which popped by almost 6% between Thursday's intraday low of $13.80 and Friday's high of $14.61.
[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]
And finally, we have the positive divergence between the falling silver price since mid-November versus the rising Moving Average Convergence Divergence (MACD) indicator.
So as we head into this week and further into year's end, these will be three key data points to watch very closely for clues on where today's silver price is headed next.
Stay informed on what's going on in the markets by following us on Twitter @moneymorning or liking us on Facebook.
The Gold Mining Revolution: Technological advancements in gold mining have been stagnant, but one tiny Canadian company is about to change that. Its special extraction method will slash production costs and send gold prices soaring. In fact, this nano cap could disrupt the entire industry...