Silver Prices Test Range Limits, Choppy Trading Continues

The consolidation tone continued on Tuesday with markets testing whether dollar strength could be extended. Silver prices tested range limits without being able to make a break in either direction.

Silver prices moved higher in US trading on Monday, but there was resistance on approach to the $17.00 per ounce level with the Japanese earthquake triggering choppy trading.

There was further resistance on approach to the $17.00 area in Europe on Tuesday with currencies generally consolidating as USD/JPY hit resistance on approach to the 111.30 area, while EUR/USD found some support below the 1.0600 level.

Despite a brief spike higher early in US trading, the overall tone was much more defensive with a sharp retreat in oil prices tending to drag the wider commodity complex lower, which also had a negative impact on silver prices.

The US existing home sales data was stronger than expected at an annual rate of 5.60mn for October from an upwardly-revised 5.47mn for September and this was the strongest reading since early 2007.

There will, however, be greater uncertainty surrounding the outlook, especially in view of the sharp increase in mortgage rates seen since the US presidential election.

The dollar overall gained ground following the data with USD/JPY continuing to test resistance above the 111.20 level, while EUR/USD retreated to test support below the 1.0600 level.

Dollar strength triggered renewed selling pressure on precious metals prices with gold testing support below the $1,210 level. With oil prices also remaining under pressure, there was a sharp retreat in silver to lows below $16.65 before a recovery back to $16.80 late in the European session with further choppy trading conditions.

The US data releases will be monitored on Wednesday and a very strong reading for durable goods orders could trigger fresh support for the dollar and put silver prices under pressure.

Position adjustment will also be notably important ahead of the US Thanksgiving Holiday on Thursday, which could lead to choppy trading conditions with consolidation the most likely outcome.

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.