Silver Prices Break Key $18.00 Resistance, Weaker Dollar Boosts Demand

Silver took advantage of a weaker dollar on Tuesday with the strength in gold also providing important support and prices moved sharply higher after breaking above the $18.00 resistance area.

The Chinese PMI data was stronger than expected, which helped underpin confidence in the global economy and supported risk appetite.

Silver prices maintained a firm tone with solid buying support on dips during Tuesday’s Asian session with a gradual move towards the crucial $18.00 per ounce resistance level.

The dollar was generally on the defensive during the European session as EUR/USD moved back above the 1.1000 level, while the trade-weighted index declined to lows below 98.00.

A weaker dollar had an important impact in boosting demand for precious metals with gold moving significantly higher. The combination of a weaker dollar and rising gold prices continued to provide strong support and silver continued to test the $18.00 level. A break above this level was crucial in triggering stop-loss buying in Europe with a move to the $18.20 area ahead of the US open.

The US ISM manufacturing data was slightly higher than consensus forecasts with a reading of 51.9 for October from 51.5 previously. The components overall were generally firm, although there was a slowdown in the rate of orders growth, which will cause some doubts over underlying trends.

The dollar was unable to gain any fresh support following the data with USD/JPY again blocked close to the 105.00 area and sliding to lows below 104.50 later in New York as risk appetite deteriorated. Lower equity markets tended to provide net support to silver prices.

Although bond yields remained higher on the day, there was still solid demand for silver and prices extended gains later in the New York session with highs above the $18.40 level and this was the highest level since the first week of October.

There will be caution ahead of Wednesday’s Federal Reserve statement with the potential for choppy trading conditions as underlying risk conditions will continue to be monitored closely.

Silver Prices 4H Chart

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Tim is a contributing author to EconomicCalendar.com. He is an economist and has been involved in financial markets for over 20 years as an analyst. He specialises in global economic trends, macro policy and central banks. Extensive knowledge, experience and data mining is used to anticipate trends in equities, bonds and forex with a contrarian slant. He is a graduate of the University of York with a degree in Economics/Econometrics.