Silver and platinum group metals also soared after EU leaders agreed to let their rescue fund inject aid directly into stricken banks from next year and intervene on bond markets to support troubled member states.
Bullion, which has for the most part of this year moved in tandem with riskier assets, also received a boost from heavy short-covering after losses earlier this week sent the metal close to being oversold.
This is confirmation of my prediction (Silver Charts Bullish) that silver was approaching oversold levels and could soon see a rally. The liquidity measures out of Europe are an undoubted positive for silver in the short term and a confirmation of the continuation of loose monetary policy.
However, there is still one factor investors should be wary of: the strengthening of the US dollar. If European currency debasement continues without further quantitative easing action from the Fed (which may well occur), the U.S. dollar may continue strengthening over the next few months as it looks like the "best of a bad bunch." While silver has shown periods where it has rallied along with the U.S. dollar, in general, higher values of the dollar are bad for dollar-denominated commodities like precious metals. See the chart below for SLV prices, USD strength, and RSI.
Some commentators view silver's downtrend since May of last year as quickly coming to an end, and note that such corrections are typical of silver's long-term trend.
Disclosure: I am long SLV.
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