The prices of silver and gold have been in the spotlight this week, given their tight correlation to rates. After the Fed announced a historical rate increase of 75 bps on Wednesday, it seems like a good time to check on the price action of both gold and silver this week. In this article, we cover the recent price action in silver as a complement to this gold outlook analysis.
Silver Price Action Still Constructive Even After a Significant Rate Hike
Silver is showing relative strength, given the magnitude of the rate increase. The first chart below is a weekly one, and it clearly indicates how the week prior to the FOMC meeting was a week of indecision in silver. The candle from the week of the announcement (annotated in pink) clearly indicates how the buyers stepped in with volume.
After the price was rejected again around the $22 level on the week of June 10, it stopped falling on Tuesday only to recover on Wednesday, the day of the FOMC announcement. It's as if the market realized the worst scenario could be already priced in. However the $22 level remains a resistance that needs to give for silver to continue moving upwards.
Let's move on to the zoomed out weekly chart. This is the setup we continue to monitor, and so far it looks like the price is still trying to reverse from there.
The major setup we continue to watch is the multi-month bull flag on the monthly chart. This is a major setup in our bullish thesis on silver. A breakout to the upside would catapult the silver price to $40 pretty fast.
Meanwhile, these are the resistance levels to keep an eye on: $22, $24-$25, and $30. For the support levels and possible scenarios, please refer to "Silver Price on the Verge of a Big Move."
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