Silver was one of the most impressive performing stocks in the quieter start to the week yesterday. The precious metal rebounded strongly after the setback it suffered last week, after failing to hold above the $32 level. But with a rise of more than 4% yesterday, the price is now back trading at around $31.70 levels.
Silver daily chart (XAG/USD).
The bounce also comes after getting close to testing the 38.2 Fibonacci retracement level, remaining near the $30 mark. Sellers failed to handle this level but dip buyers didn't care much. This brings the near-term bias back to the upside again with the $32 mark once again in focus.
However, the momentum in the price action here is not completely shared by the precious metals indicator. Despite yesterday's modest bounce, gold is still failing to impress much of a turnaround at the moment.
Gold daily chart (XAU/USD).
Compared to silver's impressive bounce, gold posted a slight rebound with near-term price action remaining below the 100 (red line) and 200 hourly (blue line) moving averages. This suggests that the near-term bias remains more bearish at the moment.
And this is where I have my reservations about the bounce we are seeing early in the week.
Don't get me wrong. Silver breaking above $32 could accelerate further bullish sentiment in the precious metals space. However, I would at least like to see gold also start to show a more bullish tinge to support that. For now, we are at least seeing a pullback in the last week. But we have not yet reached a major turning point in momentum, at least not for gold.
In the bigger picture, there are still good reasons to stay on the bullish trend in precious metals as well as copper. However, we may be overdue for a stronger pullback in commodities after the move of the past few months. So, I wouldn't rush to get complacent about the risks after last week's downfall.
For this same week, end-of-month flows involving the dollar are also something to take into consideration. This may not lead to a direct play on things in the commodities space either.