Silver markets initially tried to rally towards the $30 level on Friday but gave back the gains as the US dollar strengthening in general. At this point, silver is suffering the effects of gravity which is something that has been long overdue. If you been following me here at FX Empire, you recognize that the overbought condition has been something that I have been paying attention to, and quite frankly I welcome some type of pullback. The pullback could be something that takes several days, so a lot of patients will be needed. I believe that the market needs to pull back to at least the $26 level, if not the $24 level.
SILVER Video 10.08.20
The parabolic nature of this move needs to be corrected, but certainly cannot be shorted. Even if you told me that silver was definitely going to fall tomorrow, I would not be a seller, because I believe that the longer-term outlook for silver is much higher, so it is easier to simply wait for some type of opportunity in the form of value more than anything else. If we were to break above the $30 level, then it would begin a new leg higher, but quite frankly I do not like that move.
In that scenario, I would be more than willing to short the US dollar against other things, not necessarily against silver. Remember, this is purely an “anti-dollar” play, so if you cannot get in here, maybe you can get in buying the Australian dollar, Canadian dollar, or the like which are not as overbought. Either way, silver is going higher but is a bit expensive in the short term.
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This article was originally posted on FX Empire
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