Silver prices remain trapped in the $13.63 to $14.40 range, one which price has been respectful of since mid-November. With price being trapped for this long, when it does finally break its range, a strong trend should emerge. I would therefore surmise that the best way to trade this would be to wait for a breakout, be it bullish or bearish. As the U.S. labour market is strong and U.S. inflation is expected to rise, my long-term bias is for lower silver prices. However, gold prices suggest something different.
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Which Way Will Prices Break?
With gold trading at $1104, our latest fair-value estimation suggests that silver should be trading at $14.64, hence, we should expect a bullish breakout so long as gold remains near or above $1104.
If price does indeed break the upper end of its $13.63 to $14.40 range, then it may reach the December high of $14.63 and then further propel to $14.90, which constitutes a 50% correction to its decline from the October high of $16.17. Factors supporting a bullish breakout are the bearish stock markets and the Fed potentially turning less hawkish on the U.S. economy.
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Silver Prices | FXCM: XAG/USD
Created with Marketscope/Trading Station II; prepared by Alejandro Zambrano
--- Written by Alejandro Zambrano, Market Analyst for DailyFX.com
Contact and follow Alejandro on Twitter: @AlexFX00
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