While gold continues to struggle to find a catalyst, the price of silver made a notable move this week.
Although it was admittedly short-lived intraday action, silver prices shot up from $14.50 to touch $14.90 last Tuesday, a four-week high and a huge safe-haven bid as concerns about the euro permeated trading.
The move came as news emerged that Italy's anti-establishment government proposed a budget deficit target at 2.4%, above the EU's fiscal limits. Aggravating matters, one government official suggested Italy would do better with its own currency, rattling the euro in the dollar's favor.
While the silver price quickly settled, it has exhibited considerable technical strength since its mid-September low near $14.
Here's a closer look at the price of silver's movement this week...
How the Price of Silver Is Trending Now
Without a doubt, silver's real action came early in the week as investors flocked to the precious metal, along with gold and the dollar as safe havens. Monday (Oct. 1) was pretty lackluster as the U.S. Dollar Index (DXY) made a small gain and pushed silver back.
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But Tuesday's action was impressive with silver soaring to $14.90 by 11 a.m. on dramatic safe-haven buying. The metal would settle back and average about $14.65 for the remainder of the week, but it managed to hold this new higher price plateau.
The DXY peaked on Wednesday, which helped push silver back as euro fears dissipated.
Here's the DXY action of the last five trading days:
As the week wore on, silver prices fought to hold above $14.55 as the DXY dialed back but stayed solidly above 95.5.
Silver's trading action remained, however, pretty healthy as the metal averaged around $14.65, all the while creeping up toward its 50-day moving average around $14.75.
But on Monday (Oct. 8), as the Dow dropped another 180 points for a third straight day lower as higher yields spooked investors, the DXY jumped to 94.85 after testing 96. That stronger dollar pushed silver back to $14.30 by midday.
Now, here's my forecast for the price of silver going forward...
Here's What's Next for the Price of Silver in October and November
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The dollar's recent action looks like a relief rally that's potentially run its course.
After touching a low of 93.50 in late September, the dollar went on to rally by almost 200 basis points. At the time, I suggested we could well see a bounce, especially with the Fed about to hike rates a few days later.
I also said this bounce could be temporary. I still think that's how it will play out, with the dollar index showing signs of running out of steam after likely having hit overhead resistance at 95.50.
If a return to downtrend action resumes, as I expect, that should certainly work in silver's favor.
As for the metal itself, the uptrend so far is undeniable.
What's more, both the relative strength index and moving average convergence divergence are confirming the recent move higher from $14 to $14.65, and both are still near neutral levels. That suggests there's plenty of room for silver to move higher before approaching overbought levels.
Further support for higher silver prices is the recent action in the gold to silver ratio.
After a typically unsustainable peak around 85 into mid-September, the ratio quickly dropped to near 81 before its small recent bounce.
I think we could see this ratio continue to head south in silver's favor until it reaches at least the 76-80 range - even if gold were to stay at $1,200, which would imply silver up to $15.80.
But should gold strength return, especially on the back of a weaker dollar, then silver up near $16.50 would not be out of the question.
Support for the idea of higher silver also comes from France's Société Générale. The bank's global commodities strategist and head of APAC research Mark Keenan recently told Bloomberg, "We favor silver above gold. Silver is an industrial metal at the end of the day and has some use in the economy. It's very closely linked to copper, which we see upside in. We are supportive of silver prices from here."
As well, September purchases of U.S. Silver Eagle coins from the U.S. Mint were the highest in nearly two years if we exclude January. That looks like smart bargain buying to me.
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