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SLV: Ahead of the FOMC, Silver Looks In Trouble

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Silver prices are deteriorating quickly ahead of next week’s FOMC minutes.

Christopher-LemieuxSMBullion.Directory precious metals analysis 12 September, 2014
By Christopher Lemieux

Senior FX and Commodities Analyst at FX Analytics

Precious metal are deteriorating quickly on the assumption that the Federal Reserve will strengthen its language regarding their vague interest rate policy during next week’s minutes report.

The movement in gold and silver is expected, as market participants try to price in the Fed; and it will is likely that metals with see a revival of demand when the Fed remains dark and mysterious next Wednesday. However, until then, gold and silver will see weak price action leading into the FOMC minutes.

The iShares Silver Trust (SLV) weekly chart shows that price action is at an important demand level, near $17.75. If the bears break through this demand level, then the SLV will likely trade lower toward $17 before attempting to  test a longer-term support level at $16/$16.10.

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The RSI has dipped below the 10-day exponential average, which is bearish historically. Each time this has happened, silver has been hammered lower.

SLV is down near 2.4 percent. “One of the scariest looking charts in the world today has to be Silver. The other popular precious metal, Gold, is looking pretty terrible itself” said J.C. Parets, president and founder of Eagle Bay Capital.

Interestingly enough,  investors have redeemed $258 million from iShares Gold Trust (GLD) while adding $62.3 million into SLV.

Expect further weakness if current support levels break down. Any hints of a bump in interest rates from the Fed could send gold’s little brother lower. Conversely, the opposite scenario could cause a mighty squeeze higher.

SLV price chart 12 september 2014

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