The price of silver has been punished since the last Fed rate hike, but are we close to a bottom?
Thanks to a strong rally in the U.S. Dollar Index (DXY), where it climbed 180 basis points in just two weeks, silver prices have been stuck in the doghouse.
Silver followed gold lower, succumbing to historic selling pressure. That's caused already negative sentiment to get even worse.
However, sentiment in gold has been worse than for silver. Over the past month, silver is down 1.9%, while gold is down nearly twice as much, losing 3.7%.
As with gold, I believe silver is now dramatically oversold and offers extreme value. And looking at the gold-to-silver ratio, it's hard to dispute that silver is a true bargain at its current price.
From a macro perspective, silver remains a safe-haven insurance, one investors can currently buy at a deep discount. And it also remains in a longer-term bull market.
Just don't expect these discounts to last...
Here's How the Price of Silver Is Trending Now
The last two weeks have been brutal for silver, which peaked at $17.15 on June 14, then proceeded to lose as much as $1.25 per ounce. Silver touched an intraday low of $15.90 on Thursday, June 28, marking a gut-wrenching 7.3% drop.
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Sentiment for the metal has become downright awful, but silver has continued its trend of gaining against gold on a relative basis.
The big question is, of course, is it over yet? While impossible to say, some clues suggest it just might be. With gold prices badly oversold and the gold-to-silver ratio continuing to fall, the trend may be reversing.
Add to that the fact that silver stocks have been hovering around oversold status for the past two weeks, and we could have the ingredients for a reversal.
Here's a look at the DXY for the past week.
On Friday silver opened at $16.01 and closed at $16.09. It was a modest gain, but a gain nonetheless, thanks at least in part to a reprieve in dollar strength.
But by Monday, the DXY had rallied once again above 95, pressuring silver down to $15.82, a level not seen since early December.
Now, here's where I see the price of silver heading from here...
Here's My Newest Silver Price Prediction
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Could the dollar be done climbing?
Although the relative strength index is not completely in overbought status, the moving average convergence divergence has been trending downwards. This has been running counter to the higher dollar, suggesting that waning momentum could mean the dollar's rise is running out of steam.
Silver has broken down below its consolidating wedge pattern.
We'll have to wait and see just what happens next. It may have been nothing more than a temporary blip, especially given the action of the last couple of days. If silver can rally from here, then it will be back inside the wedge. From there it could gear up for gains, especially if it follows gold higher in this strong seasonal period through summer.
Despite the small increase of the past week, the gold-to-silver ratio has remained in a clear downward trend.
And naturally, that is a bullish sign for the gray metal.
From my perspective, if silver demonstrates that it's done falling and gets a kick from a softer dollar, we could see silver bounce, perhaps even retaking its recent high of $17.20 by the end of summer.
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