The price of silver experienced another volatile week, along with the broader markets. Silver prices officially closed the month of April at $16.31, below the $16.50 level, where it started the month.
A fresh rally in the U.S. dollar was the most obvious culprit, as the U.S. Dollar Index (DXY) managed to power higher by some 120 basis points from its early bottom.
The American 10-year Treasury's breaching the 3% yield level likely caused some of the initial stock market weakness. It also stole some of the thunder from precious metals as a safe haven.
And to cap the week, the historical summit between North and South Korea led to a dramatic decrease in geopolitical tensions. During the meeting, the North's Kim Jong Un displayed a nearly 180-degree conciliatory reversal.
This too contributed to silver's sell-off, as the crisis hedge became less attractive in the near term.
But markets and trends ebb and flow, and even if North Korea follows through on its promises, the process is likely to face some challenges.
And longer term, thanks to bullish fundamentals, the price of silver is likely to rise no matter how things play out in the Koreas.
How the Price of Silver Is Trending Now
Silver's path of least resistance was decidedly lower in the past trading week, with the precious metal starting out at $16.60, touching a low on Monday (April 23) morning at $16.17, then recuperating to $16.31 by mid-afternoon. That meant a loss of about 1.8%.
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The grey metal enjoyed a little strength on Tuesday afternoon, April 24, closing at $16.67 as the DXY weakened to 90.8. But that was the high point of the week, as the 10-year Treasury note topped a 3% yield. That hurt stocks and made investors look to bond yields as an alternative to silver.
But the market's subsequent bounce back on lessening geopolitical tensions, especially on the Korean Peninsula, crushed silver as the week progressed. The surge in the dollar, which took the DXY from 90.72 to 91.9, also played a big role in falling silver prices.
Here's a look at both the DXY and the S&P 500 for the past week.
So as silver looks ahead, we continue to see the headwind of the dollar as one of its biggest near-term risks. I also think that stock markets have to make a final bottom in the next month or two before finally turning higher once again.
Now, here's what's happening on the technical side, as well as where the price of silver is headed from here...
Here's Where I See the Price of Silver Heading Now
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The dollar's surge over the past two weeks has taken the index well beyond its recent consolidation range.
As well, the RSI and MACD are confirming that momentum on the side of the DXY. We could get a short breather here, but it looks like the dollar is set to climb a bit higher.
I still see potential strength in the dollar as being limited. My targets remain around 92, the current 200-day moving average, or 92.5, the previous peak set in early January.
If the DXY takes another few weeks to "top out," then look for continued weakness in silver until then. But once that's behind us, silver's likely to return to rally mode.
You can see silver's recent pullback reflects the dollar's rally. Further dollar strength could push silver lower, and I'd expect to see the $16 to $16.20 range hold.
As we're in a strong seasonal period for silver, I'm hopeful we'll see a vigorous latter half of May into early June for silver and silver stocks.
I think that could propel silver back to at least $17.20 or $17.60, and possibly even $18.
Meanwhile, the silver-stocks-to-silver ratio remains healthy, having risen in the face of this dollar strength.
My take is that we need to remember the big picture.
Rising yields may worry some observers. But remember that precious metals rose during their 1970s bull market along with interest rates.
This is more important for silver than the near-term geopolitical risk of what may (or not) happen on the Korean Peninsula.
Rates are headed higher, the dollar's eventually headed lower, and silver's likely to benefit as faith in the global fiat money system starts to wane. Stay long silver.
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