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Silver futures look set to break above $35 per ounce

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Silver Futures – December Contract Daily Chart

December silver futures closed the week higher once again, ending the week at $34.65 per ounce, and trading in a narrow range following Thursday’s sharp gains, which saw silver gain almost $1.50 per ounce on the day, as the Federal Reserve finally fired the starting gun for QE3. Friday’s session as a result was relatively muted, with the price action contained in a narrow range as profit taking and squaring of positions ahead of the weekend contained further gains.The bullish momentum for the industrial metal was first signalled back in mid August, following the breakout from the sideways congestion of the summer months. Since then silver has continued to climb higher, following gold prices in a sharp upwards trend, only pausing in the $30 per ounce region, before moving on and breaking above the $34 per ounce level last week. Indeed both silver and gold have been several of the major commodities, along with oil which have surged higher on US dollar  weakness.

From a technical perspective silver futures continue to remain firmly bullish and with only minor price congestion now above in the $36 per ounce region, the outlook remains firmly bullish for the short to medium term. The Hawkeye trend on both the daily and three day chart remain firmly green and with a green Heatmap and bullish volume in both timeframes this is all adding to the positive picture for silver.

In addition of course, silver prices are likely to be boosted by two related effects. The first is continued and sustained weakness in the US dollar following the injection of $40 billion per month into the US economy which is set to continue for the longer term. Second of course, this same dollar weakness is likely to lead to strong gains for equity markets, and with stimulus for the economy will come inflation which in turn will lead to demand for goods in due course. Silver of course is in high demand in many industrial processes, and should the Fed succeed in due course, then we can expect to see silver prices continue to rise fueled by both these factors.

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