Basic overview
Silver prices surged to new heights today after it was revealed that the U.S. Department of Justice has subpoenaed the Federal Reserve. This move appears to be another attempt to undermine the Fed’s autonomy as the White House seems eager to find reasons to dismiss Fed Chairman Jerome Powell.
We experienced a similar threat last year when President Trump sought to remove Fed Director Cook. Now we’re still awaiting a ruling from the U.S. Supreme Court on that matter, which, frankly, hasn’t yielded any results yet.
Stocks related to silver saw gains with the news, fueled by concerns that compromising Fed independence could lead to increased inflation and a weaker dollar. However, the repercussions of such a move would be significant, affecting not only the U.S. but the global economy; hence, the Fed’s independence seems unlikely to be in jeopardy.
Tomorrow, all eyes will be on the U.S. CPI report. A positive nonfarm payroll report came out on Friday, showcasing a drop in the unemployment rate to 4.4%. While a January rate cut is no longer being considered, the market anticipates two cuts before year-end, with the first possibly occurring in June. Should inflation reports turn out to be hotter than expected, some cautious energy could affect silver prices in the short term. However, weaker data might provide a more supportive backdrop for silver.
Overall, there’s a good chance silver will keep trending upwards as real yields are likely to decrease, thanks to the Fed’s dovish approach. On the flip side, if interest rate expectations shift towards a more hawkish stance, it could weigh on markets.
Silver Technical Analysis – Daily Time Frame
On the daily chart, silver responded positively to the DOJ news, bouncing off a trend line to reach today’s record high. There’s not much more to derive from this timeframe; the most favorable entry point for a long position from a risk/reward standpoint seems to have been near that trendline. For additional insights, you might want to focus on shorter timeframes.
Silver Technical Analysis – 4 Hour Time Frame
Looking at the 4-hour chart, today’s breakout into new territory becomes more apparent. The previous all-time high around 82.68 might now provide support. Buyers are likely to step in around these levels, but there are risks if the price dips below 82.68, which could result in a pullback to the main trendline.
Silver Technical Analysis – 1 Hour Time Frame
The 1-hour chart highlights a minor uptrend, indicating bullish momentum. From a risk management angle, buyers are in a somewhat precarious position trying to set up near the trendline, while still looking to target new highs. Meanwhile, sellers are keen to see a drop below the trendline to bolster their bearish positions on the next significant trendline.
Future catalyst
Tomorrow brings the U.S. CPI report, followed by November retail sales and the U.S. PPI reports on Wednesday, although that data could be considered a bit stale by then. There’s also a possibility that the U.S. Supreme Court might weigh in on President Trump’s tariffs. Then on Thursday, we will receive the latest unemployment claims figures.
