Precious metals have had an extremely powerful week as both gold and silver rose sharply, with silver up more than 6% from this week’s lows, currently trading near 24.50 USD.
Stubborn inflation & weak US macro figures
On Thursday, initial jobless claims worsened sharply to 286,000, up from the last week's 231,000 . Continuing claims also rose and printed 1.635 million, against 1.551 million a week ago.
Existing home sales also failed to meet estimates and plunged 4.65 month-on-month to 6.18 million. So it looks like rocketing home prices might be deterring people from buying.
On the other hand, the Philadelphia Fed manufacturing survey improved more than expected in January, rising to 23.2 from 15.4 in December.
Thursday's gains in silver were really strong, despite Janet Yellen, the US Treasury chief, sounding a positive note on the inflation outlook for the year ahead, indicating that it might fall sharply should the pandemic be brought under control.
Traders now expect the Fed to start the lift-off in March, with three more rate hikes priced in for the rest of the year.
Despite rising interest rates, the USD seems to be struggling as the dollar index is about to decline below its long-term uptrend line. Should that happen, it could be a major bullish impetus for both silver and gold.
Impressive technical situation on daily chart
The metal has managed to jump above the long-term bearish trend line for the first time since June. That could mean the long-term downtrend might be over.
Now it is facing another massive resistance at the 200-day moving average near 24.70 USD . The last two times silver had rallied to this average, a sharp sell-off occurred. Therefore, it must jump above that level to confirm the bullish momentum.
In that case, the next target could be at November highs near 25.40 USD. Once the metal is above that zone, the long-term outlook could change to bullish.
Alternatively, the support seems near 23.90 - 24.00 USD zone, where the broken trend line is converged with previous highs and lows. Silver must stay above it for the bullish momentum to persist.