Silver Jumps to 6-Week High on China Tensions

December 23 2019

December 23, 2019 - Kenny Fisher

Silver prices have jumped 1.0% on Monday, after China delivered a blistering rebuke of a U.S. defense bill that demonstrates support for Taiwan and democracy protestors in Hong Kong.

Silver prices are on the move. The metal posted strong gains on Friday and continues to head higher in Monday trade. In the European session, silver is trading at $17.33, up $0.16 or 0.91% on the day. Earlier, silver touched $17.38, its highest level since November 7.

China Denounces U.S. Defense Bill

Tensions between China and the U.S. rose over the weekend, but this time it was not over trade differences. Rather, China is upset with the defense bill that the U.S. Senate passed by an overwhelming majority. Under the bill, the U.S. has promised to strengthen defense ties with Taiwan, which China considers as part of the mainland. As well, the bill calls for support for democracy protesters in Hong Kong as well as the minority Uighar population, which has severe repression from the Chinese. On Saturday, the Chinese government expressed its “strong dissatisfaction” with the defense bill, charging that the U.S. was interfering in China’s internal affairs.

The sharp Chinese reaction has triggered gains in safe-haven gold and silver in Monday trading. Still, the Chinese may have to grit their teeth and suffice with verbal retaliation. President Trump has shown that he is a tough negotiator, and the Chinese are unlikely to take steps that will hinder further progress on the trade front, after concluding a limited trade agreement with the U.S. earlier in December.

Ahead – Durable Goods Orders

It is a light economic calendar for Christmas week, but there are key releases on Monday which traders should treat as market-movers. Durable goods orders rebounded in October with a solid gain of 0.6%, well above the estimate of -0.5%. However, the indicator is expected to slow to 0.2% in November. The core release, which excludes volatile items such as aircraft orders, is expected to jump to 1.5%, up from 0.6% in the previous release. If the forecast is accurate, investor risk appetite could get a boost and send safe-haven silver to lower ground.

Silver Technical Analysis

Silver has posted sharp gains on Monday, breaking above resistance barriers that had kept the metal around the 17.00 level last week. In the Asian session, silver broke past the 50-EMA at 17.12 and proceeded to break above resistance at 17.25, which last saw action in the first week of December. Above, there is resistance at 17.50, followed by 17.75. On the downside, we find support at the symbolic 17.00 level, followed by the 200-EMA at 16.60. Below, there is support at 16.50.