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Silver consolidates after diverging signals

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Silver consolidates after diverging signals

Silver prices remain in a tight range, as recent economic data has been mixed creating a consolidative pattern for precious metals.  Silver is used in some instances as an industrial metal which would show strength in the face of economic growth.  The dollar seems to be the driver of silver prices, and stronger than expected data could generate additional price liquidation.

Hedge funds reduced short positions according to the latest commitment of traders report.  According to the CFTC managed money reduced short position by 1400 contracts while keeping long positions the same.

Wednesday’s better than expected GDP data seemed to put a floor under prices.  According to the Commerce Department US second quarter growth increased by 1.7% compared to the 1% that was expected by economists.  The majority of the growth was driven by business investment and stable government spending.  The price deflator was in line with expectations which put a cap on inflation eroding silver’s upside.  Unfortunately first quarter GDP was revised lower, moving down from 1.8% to 1% offsetting some of the second quarter gains.

Silver prices tested resistance levels near a downward sloping trend line at 20 per ounce. A close above the 20.65 level would lead to a test of resistance near 22.  Support on silver is seen near 19.  Momentum on silver is nearly non-existence, as the MACD (moving average convergence divergence index) is printing near the zero index level.  The spread (the 12-day moving average minus the 26-day moving average) is printing on top of the 9-day moving average of the spread.  The RSI (relative strength index) is printing near 46 which is in the middle of the neutral range reflecting a consolidative pattern.

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