Silver rises to $79; $121 bid rests on dollar, COT

Silver rose about 3% to roughly $79 in the latest trading session after clearing a multi-month resistance shelf while the U.S. dollar weakened. The price advance pushed silver above the 0.236 Fibonacci retracement level.

The metal climbed about 167% from an October low near $45 to a January peak at $121. Since late January, silver has traded inside a descending channel that capped rally attempts.

The U.S. Dollar Index has been in a downtrend since early April and entered a falling channel. A weaker dollar lowers the opportunity cost of holding non-yielding metals and makes dollar-priced commodities cheaper for overseas buyers. Crude oil prices fell on May 6 amid optimism about a potential U.S.-Iran agreement that could reopen the Strait of Hormuz; lower oil and reduced safe-haven demand coincided with the dollar’s slide. A further roughly 1.55% decline in the dollar that breaks its channel would remove a headwind for dollar-priced assets.

The Commodity Futures Trading Commission’s Commitments of Traders report for the week ended April 28 showed total silver futures open interest fell by 14,187 contracts to 101,275. Non-commercial traders trimmed both long and short positions; longs fell by about 1,919 contracts and shorts by about 2,359 contracts. Net speculative positions remained long at roughly a 4.4-to-1 ratio, with 31,314 long contracts versus 7,154 short contracts. Commercial participants held about 69.2% of open interest on the short side.

Price levels outline the route back to the January high. Reclaiming $78 cleared the 0.236 Fib level; a sustained hold above that opens $90 at the 0.382 retracement, where a break of the channel’s upper trendline would be expected. The $99 area, the 0.50 level, acted as a repeated ceiling after January. Clearing $99 would represent the first breach of the post-peak trading range and open the way to $108 (0.618), $120 (0.786) and the $121 peak. From current levels, rising to $99 would require about a 24% gain and reaching $121 would be roughly a 53% advance.

If silver falls back below $78, prices could return to the channel and test roughly $64 and $60, the channel’s lower band. A break below $60 would extend losses beyond the channel band. In the near term, U.S. dollar movement, futures positioning and silver’s ability to close above the channel’s upper trendline will determine whether the metal can approach the record high before month end.