Silver diverges from gold; unlikely to reach new record highs without Fed’s support

FUNDAMENTAL
OVERVIEW

Silver has been diverging with gold recently as it’s been rallying steadily
since last week. They are generally correlated but can decouple sometimes. Silver
is also much more volatile, so it might just be exacerbating the boost from
falling real yields.

The fundamentals haven’t changed. We still have the US and Iran in a
deadlock. We still have high inflation and oil prices. And we still have the
Fed slowly turning more hawkish.

Traders will need to focus on the Fed going forward as new all-time highs
are unlikely to come without an easing bias from the central bank. If nothing
changes before the June meeting, we might be in for a hawkish surprise as
inflation continues to run hot and the US data remains resilient. In that case,
we can expect a selloff in silver and potentially new lows.

In the short-term, a resolution and the reopening of the Strait will likely
support silver on falling oil prices and increased rate cut bets as inflation
worries would ease. But if the Strait remains closed for longer and oil prices
stay elevated, the risk of the Fed turning hawkish anyway increases.

SILVER TECHNICAL
ANALYSIS – DAILY TIMEFRAME

On the daily chart, we can
see that silver has been rallying steadily for more than a week now, with the
price approaching the key 96.00 handle. If it gets there, we can expect the
sellers to step in with a defined risk above the level to position for a drop
back into the major trendline. The buyers, on the other hand, will look for a
break to increase the bullish bets into the cycle highs.

SILVER TECHNICAL ANALYSIS –
4 HOUR TIMEFRAME

On the 4 hour chart, we have
an upward trendline defining the bullish momentum. The buyers will likely
continue to lean on the trendline with a defined risk below it to keep pushing
into the 96.00 level. The sellers, on the other hand, will look for a break to
pile in for a pullback into the 83.00 support.

SILVER TECHNICAL ANALYSIS –
1 HOUR TIMEFRAME

On the 1 hour chart, we
have a minor counter-trendline defining the pullback into the upward trendline.
The sellers will likely continue to lean on it with a defined risk above it to
keep pushing for a break below the upward trendline. The buyers, on the other hand,
will look for a break above the downward trendline to increase the bullish bets
into new highs. The red lines define the average daily range for today.

UPCOMING CATALYSTS

Today we get the US Retail Sales report and the latest US Jobless Claims
figures.