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Silver dropped 5.8 cents, or 0.4%, to $14.701/oz; Decoupled from gold's advance in risk-off markets

  • March silver dropped 5.8 cents, or 0.4%, to $14.701/oz on Tuesday despite a bullish settlement in gold and a softer US dollar.

The price of silver decoupled its correlation with gold on Tuesday as investors preferred the security of the gold's safe haven status whereby US stock dropped late in US trade as investors remained cautious have of the Federal Reserves interest rate decision and the outcome of the FOMC's two-day meeting that will conclude on Wednesday. 

  • Riksbank Preview: Rates going up in December? - ING
  • FOMC: Policy likely to be even more data dependent - TDS

As can be seen in the performance of yields, US Treasuries attracting a flight to quality with the US 10yr treasury yield falling from 2.85% to 2.82%, while the 2yr yield fell from 2.68% to 2.65%, the lowest since early September. The Fed funds rate futures continued to price a rate rise this week at around a 70% chance but yields for 2019 continue to slide now only about 50% priced for a hike next year.

The Fed is expected to raise the target range for Fed funds to 2.25%-2.50%. Markets will be looking to see if the Fed is making policy even more data dependent and whether we will see a decline in the 2019 median dot to two hikes from three. 

Silver levels

  • Support levels: 14.59 14.51 14.44 
  • Resistance levels: 14.75 14.81 14.90

The price of silver is holding back above the 23.6% retracement fibo of the mid-Nov rise to recent Dec highs, albeit unable to penetrate R1 with any conviction at 14.75. However, the hanging man on the 4hr time frame leaves a bearish tone on the price formation and a dip below the pivot at 14.66 opens risk to S1 14.59 and 14.51 for a full reversal of the 14th Dec near-term correction which confluence of the 1004hr SMA and S2 should offer a strong level of support. A break there opens risk to the double bottom lows of the 50% Fibo of the mid-Nov lows to recent Dec highs at 14.36. On the flipside, eyes will focus on the Dec highs, at 14.82, R3 located at 14.90 and then 14.90's in general as being the Aug-now resistance area. 

 

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