Silver and SLV ETF Prices Lost Crucial Support: Will US NFP Data Turn the Tide?

Silver and the iShares Silver Trust ETF (NYSE:SLV) extended their downtrend, falling to their lowest levels since November last year. Silver has dropped 60% from its year-to-date high of $121.40, with focus now on the upcoming midterm elections and the US nonfarm payrolls (NFP) data.

Silver and SLV Fall After the Fed Decision

Silver and its biggest ETF continued the sell-off and lost a crucial support level after the Federal Reserve delivered a hawkish pause. The bank decided to leave interest rates unchanged between 3.75% and 4%.

Beth Hammack and Lisa Cook voted to hike interest rates by 0.25%, pointing to the elevated inflation rate. Kevin Warsh, the Fed Chair, has hinted that he will support another interest rate hike in December. Silver tends to underperform the market whenever the Federal Reserve is hiking interest rates.

Silver also fell as the US Dollar Index (DXY) kept climbing, reaching a high of 102.52, up 6.7% from its lowest level this year. The dollar’s gains were capped by the ongoing retreat in US bond yields, with the 10-year yield falling from 5.36% in mid-October to the current 4.933%.

On the positive side, American investors have continued investing in the iShares Silver ETF, which has added $338 million in the last 30 days. It now has over $26.3 billion in assets, making it the biggest silver fund. 

Looking ahead, the next catalyst for silver will be the US midterm elections, which take place early next week. President Donald Trump has hinted that the US will resume its attacks on Iran after the vote. If that happens, crude oil prices could continue rising, which would lift inflation and raise the odds of another Fed rate hike.

The US will also publish the October nonfarm payrolls (NFP) data on Friday. A strong NFP report will raise the possibility that the Federal Reserve will hike rates, which will drag silver prices.

Silver Price Has Lost a Crucial Support Level

On the charts, silver has been in a strong sell-off in the past few months. It has slumped from $70.82 in August to $49.1 today. 

Silver dropped below the important support level of $55, the lower side of the inverted cup-and-handle pattern. This pattern often leads to a steeper sell-off over time. 

Silver has also formed a death cross pattern, which is a common continuation sign. Therefore, silver may continue falling, potentially to the key support level of $40. The alternative is where it initially retests the resistance at $55 before resuming the downtrend.

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