Strong dollar pushes silver to the lowest level since 2021
The price of Bullions brother - the Silver - has recently tanked to the long-term demand zone of $22. One may become eager to finally press the buy button since silver is just "really low" and there is so much space up to get the %%%'s!
It really is! But there is also a flip coin to this good-looking setup, which comes in stealth and that will hurt you if you don't respect it - US dollar.
The dollar index is at its highest level since the beginning of the year, which combined with technical setup at least offers the question of what to do next. You may already know that precious metals are very sensitive to US dollar and show strong negative correlation, which is however not mutual.
That means following:
○ US dollar - affects -> Silver
○ Silver - does not affect -> US dollar
There are also some fundamentals for both of the assets playing significant role in global background.
○ Unlike gold, silver is much more of industrial commodity - mostly in technology. This could be a solid argument not to immediately deny the possible turnover, especially during the global semiconductor shortage.
○ Silver is also a safe harbor that investors turn to in times of uncertainity. Keeping the Evergrande collapse issue and the seasonal covid-19 character in mind is also a weapon to fundamental arsenal of arguments worth reloading.
○ After massive and long-lasting supportive policy that rocketed inflation, the Fed now needs to cool down the economy through gradual decrease of bond purchases and interest rates hikes starting in 2022. And foreign investors love higher rates- especially dollar rates.
The purpose of this analysis is not to conclude whether to buy or sell one of those assets, but to connects the dots in a highly connected markets through the determinant of the global economy- the US dollar. US dollar analysis should always come prior to precious metal analysis.
Keep your numbers green,
Skål!
It really is! But there is also a flip coin to this good-looking setup, which comes in stealth and that will hurt you if you don't respect it - US dollar.
The dollar index is at its highest level since the beginning of the year, which combined with technical setup at least offers the question of what to do next. You may already know that precious metals are very sensitive to US dollar and show strong negative correlation, which is however not mutual.
That means following:
○ US dollar - affects -> Silver
○ Silver - does not affect -> US dollar
There are also some fundamentals for both of the assets playing significant role in global background.
○ Unlike gold, silver is much more of industrial commodity - mostly in technology. This could be a solid argument not to immediately deny the possible turnover, especially during the global semiconductor shortage.
○ Silver is also a safe harbor that investors turn to in times of uncertainity. Keeping the Evergrande collapse issue and the seasonal covid-19 character in mind is also a weapon to fundamental arsenal of arguments worth reloading.
○ After massive and long-lasting supportive policy that rocketed inflation, the Fed now needs to cool down the economy through gradual decrease of bond purchases and interest rates hikes starting in 2022. And foreign investors love higher rates- especially dollar rates.
The purpose of this analysis is not to conclude whether to buy or sell one of those assets, but to connects the dots in a highly connected markets through the determinant of the global economy- the US dollar. US dollar analysis should always come prior to precious metal analysis.
Keep your numbers green,
Skål!
