SILVER TODAY – Prices break out of consolidation mode

Analysis

• Silver found support around the long-term UTL after the sell-off and a base seems to have been built, with prices climbing out of the top of the flag this morning. 
• With the stochastics rallying, the break out looks meaningful and the consolidation now looks less like a bear-flag.
• It would take a move above $18.50 per oz to negate the recent weaker tone.

Other factors

As with gold, silver prices have spent most of October consolidating after the early-October sell-off.

The combination of the sell-off and prices finding support may now encourage more physical buying back to the market, especially with other industrial metals looking more bullish. 

CFTC data for October 25 showed the net long fund position (NLFP) drop 2,213 contracts. This was the fourth week of decline; over that period, the NFLP has dropped 27,789 contacts. Most of the decline has been via long liquidation at 24,735 contracts while the gross short position has not changed much. The lack of fresh selling suggests the market is not getting bearish but the sell-off has stemmed more from profit-taking.

There are multiple reasons for being bullish that we think will remain in place – potential repercussions from the Brexit, global debt, negative interest rates, the fiat-ness of currencies, record highs in equities and bonds and the US election. 

Silver ETF holdings remain near at record highs despite the sell-off so we feel investors will see this as a buying opportunity.