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Is a black swan coming for silver?

Silver started off 2012 with remarkable gains. After rising 19.15% in January, the precious metal added another 6.49% to its value in February reaching the dizzy highs of $37 per ounce, not seen since September 2011. In March the precious metal entered a downtrend channel and has been trading within a sideway range since 14th March. As the risk-off attitude came back into the markets on Monday, silver broke below support level at 31.28, to consolidate above the key 30 level. Considering the downtrend movement of the US Dollar index in April, the bearish pressure in the silver market could be explained by the negative effect of a possible lack of industrial demand on the prices, but it also leaves room for ample speculation that the silver market could be manipulated. JS Kim shed some more light to the silver (and gold) price suppression scenario with his article about the simultaneous fall and recovery of gold and silver within a matter of half an hour on 17th April. (For more information click here). If we look back in 2007/08, gold and silver rallied significantly while S&P 500 was crashing and it looks like the conditions in the financial markets are quite similar, which makes a spike in the price of silver imminent.
From a technical point of view, despite the breaking of the 31 level, support extends all the way down to the 30 mark. With the MACD signal line poised to cross above the zero line and the RSI hovering around the 50 level since mid-January on the weekly chart, the bulls could step back and more prices upwards again. The picture on the daily chart remains indecisive with the bearish failure to break below key support at 30 suggesting that the bears could be running out of steam. The first targets for the bulls to watch sit at 34.29 and 38.21, the 38.2% and 50% Fibonacci retracements respectively from April 2011 high to October 2011 low. If triggered, this could set the stage for a run towards August highs above 43. At 30.86 this morning with the next key support sitting at 27.90, the ratio of the upside potential to the downside risk is around 1 to 4. The market would begin to look weak on a break below 27.90, but unless this level gives away, we could expect a spike soon.
Weekly chart

Daily chart

Dafni Serdari
Market analyst
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