It’s crazy to think that at this time last year, silver was trading at $30. And here we are today talking about near $10 price swings in just one day. These are nearly once-in-a-lifetime moves we’re seeing in the commodities space and it’s absolutely wild. Since the start of the year, the run up in silver has gone parabolic and things are continuing down that path this week.
The precious metal has easily breezed past the $100 mark with the high yesterday touching $117.75. All that before a bout of profit-taking hit and the pair fell back to around $103 levels to wrap up the day. Fast forward to today and the bids are flowing back in with silver racing up to just above $113 as we get into European morning trade.
That sees it comfortably recover more than half of the overnight drop already. So, what’s next for silver?
The run will stop when it stops. It is a fool’s errand to be picking or calling a top and it has been all month long. This is the same principle of don’t ever catch a falling knife. It is just the script has flipped and it’s a dangerous gamble to be trying to call for a peak/top in a market this wild.
As for the fundamental factors, the same key drivers underpinning the parabolic rally are all still at play. The currency debasement narrative helping to send precious metals into overdrive alongside silver’s own supply side tightness makes for a potent combo. And in a time when the dollar is weak and market players loving to pile in on anything with a perfect storm, it is resulting in what we’re seeing.
And the thing is, these factors are likely to stay for an extended period of time. However, that is not to say that we won’t be seeing silver prices facing a strong and sharp correction any time soon. With any moves that go too far and too fast, there’s always the risk of a reckoning coming.
So, that’s the danger that silver traders will have to be mindful of. I mean, the precious metal is already up some 57% this month alone after ~98% gains in the previous six months. When the hammer falls, it is going to fall hard. However, expect dip buyers to quickly recover ground once we fully flush out that correction.
This article was written by Justin Low at investinglive.com.