Silver: Short term bulls taking profits in resistance area

The price of silver has reached a prior support structure which now acts as resistance from where we have seen a sharp pullback on the hourly time frame.

At the time of writing, XAG/USD is trading at $28.1050 having moved up within a $27.1032 and $28.4676 price range, adding some 2.25% on the day. 

Fundamentally, the price of silver is correlated to the ebbs and flows of the bond markets, and more specifically, real yields. 

Nominal and real yields has been on the come back towards the end of last week which threw down a spike strip which tripped up the bulls.

However, with the 10-year yields sliding some 4% on the day, or 10% since the highs of the 13th August, the rise has run out of steal and thrown a lifeline to the committed bulls in precious metals. 

In this context, the pullback has sapped out excess positioning from gold futures, mitigating the risk of a rush-to-the-exits as participant position sizes remain neutral, while the bullish narrative continues to gather share of consensus,

analysts at TD Securities explained. 

The analysts stated that silver remains their precious metals favourite.

A clean positioning slate, rising industrial demand, spectacular investment demand and inventory constraints should maintain momentum to the upside. In this context, the additional negative gamma created by a surge in levered ETF flows in silver continue to add some fat to silver's right tail.

Silver resistance structure