Silver Price Breaks Out of Range Due to Non-Farm Payrolls & Oil Prices

As of 2:30 p.m. EST, Silver prices (for December delivery) traded up +$0.477 (+2.52%) higher to $19.420, with today’s trading range between $18.825 and $19.450. The 52-week range for the contract sits at $13.770 – $21.250. Prices throughout this report are measured in U.S. dollars per troy ounce.

Silver - Recap and Outlook for Sept 2  2016 - ONE

The 3-day chart (above) shows the bid of silver (spot) prices sitting at $18.835 as of 2:35 p.m. EST.

In my last report on silver I stated that “Because we are along the upper resistance ($18.800) of the recent range, a better trade may be to go long here while utilizing a stop-loss (about 5 cents lower).”

Silver has been mostly stuck in a range between $18.500 and $18.800 prior to the jobs data coming out which was anticipated to finally trigger more volatility in the price of the grey metal.

The U.S. economy added 151,000 jobs in August, which is a slowdown in growth. That was below the 180,000 that had been anticipated for August. For the month of July, the job gains amounted to 255K, while June saw 292K, May saw 24K, and April saw 144K jobs created.

Looking at historic August jobs data, the expected figure could have been easily anticipated by simply looking back at the August jobs data released over the past 5 years.

With the payrolls cooling, investors remain guessing if the Federal Reserve will hike rates this year. Nobody can definitely say that a hike in September is off the table, but I believe that it is highly unlikely.

That will impact the U.S. dollar going forward, as well as other dollar-denominated assets such as precious metals.

Silver - Recap and Outlook for Sept 2  2016 - THREE

The current gold/silver ratio sits at 68.316 (based on the December contracts), down from yesterday’s 69.548. The ratio, when looking at their spot prices, sits at 68.46 (down from 69.71 at the same time yesterday).

Gold (for December delivery) rose +$9.60 (+0.73%) higher to $1,326.70/oz. by 2:30 p.m. EST. It traded between $1,307.40 and $1,334.00 today while the 52-week range presently sits at $1,052.60 and $1,384.40.

On the intra-day chart (above) we can see that the blue trendlines (based upon the MACD peaks) suggest that December silver would have been justified trading closer to $19.125 (or more than 30 cents lower).

This, combined with the fact that gold’s fluctuations were more significant to the downside, may give silver a more negative bias when trading opens after the weekend. This, of course, is subject to any major news developments while markets are closed.

Silver - Recap and Outlook for Sept 2  2016 - FOUR

On the one-day chart (above) we can see that while the Dec. gold price rose by only about three quarters of a percent today, silver prices (also Dec.) rose closer to two and a half percent.

But unlike the past couple days, silver was not alone in outperforming the other two. Today, oil prices (Oct.) managed to match the price performance of the grey metal.

While WTI crude oil halted a 4-day slide, it is still down about -7% for the week. Russian President Vladimir Putin said today that King Salman of Saudi Arabia is a very reliable partner with which to make agreements.

Putin also said that he would be in favour of a production freeze while giving Iran a bit of leeway (because it wouldn’t be fair to limit them to sanction levels.

For the week, oil prices fell about -7%, making it the worst week since early July. It was the second-straight week that WTI crude prices fell.

This was partly due to the U.S. dollar making its second weekly gain. Today, it dipped on the jobs report but then managed to recover all of those losses.

Silver - Recap and Outlook for Sept 2  2016 - FIVE

Today I have selected the 1-month chart of December silver, to show how it has broken out (to the upside) from its recent trading range.

In yesterday’s silver report I mentioned that silver “could head back up to the $26.00 – $36.00 range without much difficulty.”

While these targets remain in place for the long term, we could see some consolidation in the very near term. This is because both the Stochastics and Relative Strength Index are in over-bought territory, making them prone to a fall before they can make another leg higher (during which time the price of silver could spike).

The MACD is also flattening and could be forming a top, but if you look at where the previous peaks of this indicator were, compared to where the price of silver was back then, we would be given an excuse for silver to head back above $20.500 without much difficulty.

In order to get a secondary opinion, the pink trendlines (which are based upon the MACD troughs) seem to agree that the next targets are indeed to the upside.

Robert Patyk has 15 years’ experience trading stocks, options, commodities, futures options, & currencies. At age 17 he won first place in an international stock trading competition. Robert predicted the market crash of 2008 two years early. He is a contrarian, top-down macro trader achieving high returns by studying geo-politics, fundamentals, and technical indicators.