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Asset Watch

Is the silver squeeze back?

Tuesday May 21, 2024

It’s déjà vu all over again, as silver’s recent surge evokes memories of 2021. Back then, GameStop and AMC led the meme-stock mania, and the Reddit rebels eventually set their sights on silver. Now, as meme stocks made another comeback last week, is silver’s strength a coincidence?
Phil Streible of Blue Line Futures said, “[Last] week was kind of the recreation of the meme stock. Those speculators naturally look for different areas to exploit, and silver is usually the one that they favour.”
While this iteration of the silver squeeze pushed the white metal to its highest level since February 2013, could the bull market just be getting started, or is this a warning sign of an imminent top?
On the one hand, silver benefited from the CPI slowdown, as weaker inflation hurt the U.S. dollar and increased rate-cut bets. The fundamentals were also supportive, with precious metals benefiting from a more dovish environment. On the other hand, silver must pass a few technical tests to avoid another disappointment.

Silver ended last week above its 2020, 2021, and 2024 highs, so the breakout is constructive. However, it needs to hold the $30 area to ensure that prior resistance has become support.
As such, pay close attention to the 10-week moving average. During the 2020 surge, silver never closed below its 10-week MA, however there was a meaningful breakdown shortly after the 2021 silver squeeze. Therefore, with the 10-week MA providing support during the March and May 2024 corrections, watch the key level to determine if a long position is justified.
So, could silver make a run toward its all-time highs, or have the easy gains already come and gone?


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