Just three days ago, the widely followed U.S. Dollar Index (DXY) was trading at 92.5.
Today, it's already 200 basis points, or more than 2%, lower. The dollar has now clearly broken down like I've been saying we should expect.
That, combined with overly negative sentiment, a strong seasonal bias, and a return to a bull market, have silver trending higher. In the immediate term, silver prices today are down 1.4%, to $17.20, but don't expect this dip to last. However, silver prices are still up roughly 9.2% since mid-December.
If the dollar continues to weaken, expect that to help drive even further gains for this underappreciated and dramatically undervalued metal.
I think 2018 could see silver do even better than the current king of cryptos, Bitcoin.
But perhaps one of the biggest near-term drivers is going to be a return to positive sentiment as silver runs out of sellers...
Here's How Silver Prices Are Trending Now
Silver actually had a flattish week, as the DXY managed to consolidate high around 92.5. On Tuesday, Jan. 9, silver opened at $16.99 then trended downward on balance through the day. That took the metal steadily lower to finally close at $16.93.
BREAKING: Executive Editor Bill Patalon just saw something on his precious metals charts he's only seen twice in 20 years. He calls it the "Halley's Comet of investing" - and it could lead to windfall profits. Read more...
On Wednesday, the DXY dipped just below 92 around 7:00 a.m., then rallied back to 92.3 by 5:00 p.m. Silver prices popped to $17.10 on the dollar's short-lived weakness at 7:00 a.m., then retreated to open at $17.07, and kept declining to eventually close at 16.94.
Thursday would turn out to be calm as well, despite a sell-off around 7:20 a.m. that took the DXY to 92.08 by 8:00 a.m., then lower still to 91.81 by 10:00 a.m. Silver opened flat at $16.93, but gained only slightly to close at $16.96.
Here's the DXY's action of the past week.
Friday brought nearly identical action in the DXY as Thursday, only earlier in the day. The DXY sold off again, this time around 3:00 a.m., from 91.77 to 91.4 by 4:00 a.m. By 8:00 a.m., when silver began New York trading, the DXY was at 91.3, and silver had jumped to $17.12. By 2:00 p.m., the DXY was just above 91 but trending downward, and silver had rallied higher yet to $17.19, eventually closing at $17.21.
On Monday, Jan. 15, silver rallied further as selling pushed the dollar lower. The DXY was at 90.43 by 8:00 a.m., and silver buying had pushed the metal to $17.33, where it closed out the day as the dollar had remained basically flat.
Now that we've examined how silver prices have been trending, here's my bullish outlook for the metal in 2018...
Here's How High Silver Prices Are Headed in 2018
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The dollar looks like it has already topped out, not reaching even the 93 level, where I said it could peak. Now that it's broken down below my downside target of 91.5, look for even more weakness ahead.
In the near term, the dollar could bounce slightly, since it's rather oversold. But I'd still expect the overall trend to be distinctly downward.
My next target is way down at 88, then just below that at 86, and you have to go back all the way to late 2015 for the last time the DXY was in that range.
Meanwhile, silver appears to have some decent upside potential in the near term.
I still see downside risk limited to about $16.50, but if silver can manage to close above $17.50, then a run to $18.25 would be in the cards.
Silver does not look overbought, so it should have some room to run.
So why do I see so much potential for silver? A recent Commitment of Traders (COT) report shows futures traders are at an extreme bearish sentiment level last seen in 2014, and before that all the way back in 2003.
This makes a strong contrarian case for silver. I think we could see the $18.25 target in the next month or so and a run-up to as much as $20.50 by this summer.
Up Next: Rare Gold Anomaly
Money Morning Executive Editor Bill Patalon just caught something on his gold charts that he's only seen twice in the past 20 years. A $13 billion gold anomaly he calls the "Halley's Comet of investing."
It's very rare, and fleeting, and Bill sees things lining up perfectly to bring some very sizeable precious metal profits to well-positioned investors.
Click here to check out his research...
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