Silver had a rough day in the market on Friday, falling well below the 200 day and 200 month moving averages on the commodity. The declines were caused by a piece of macroeconomic data that focused on durable goods orders. Today, we'll talk about the durable goods orders, what they have to do with the price of silver, what we can expect to see moving forward, and how binary options traders can take advantage of the trends.
US Durable Goods Orders Come In Positive
On Thursday, a key piece of information with regard to the state of the United States economy was released. This information is known as US durable goods orders. In the United States, one of the largest economic concerns was the idea that factories weren't seeing enough demand and that manufacturing was retracting. However, based on the growth in US durable goods orders in the month of January, investor concerns are starting to dwindle. During the month of January US durable goods orders grew by 3.9%, which is the largest growth we've seen in the figure since mid-2014. In a statement, JPMorgan Chase's chief U.S. economist, Michael Feroli said…
“It's good to see the data aren't in free-fall… Business investment could go back to positive in the first quarter.”
What This Has To Do With Silver
Silver, as with any other precious metal is commonly looked at as a safe haven investment. That means that when market and economic conditions are poor, investors lose their appetite for risk and flock to the precious metal to keep their money safe. This increases demand and ultimately causes the value of silver to climb. Adversely, when we see positive economic data and market conditions, investor appetites for risk tend to grow. As a result, they tend to sell their silver and look to the market for gains, leading to declines in the price of the commodity. So naturally, because we saw a bit of positive economic data out of the United States, the US market had an incredibly good day on Friday, leading to a poor day for growth in the value of silver.
What We Can Expect To See Moving Forward
While it's understandable that the market saw big gains and that silver saw big declines in the durable goods orders growth, I have a relatively mixed opinion of what we can expect to see moving forward. In the short term, the strong data is likely to continue pushing silver down at a slow and steady rate. However, it's also important to remember that economic data has a tendency to be incredibly volatile… especially macroeconomic data. So, it wouldn't be out of the realm of possibility that the strong growth in US durable goods orders in January proves to be a peak on the chart before more declines to come. With that said, I'm still expecting that silver will see overwhelmingly positive growth throughout the rest of the year.
How Binary Options Traders Can Take Advantage Of The Trends
As binary options traders, it's our job to predict what's likely to happen with regard to the values of assets moving forward. In this particular case, that job is relatively easy. Investor excitement with regard to US durable goods orders will likely keep resistance on silver in the short run. So, it would be a good idea to trade put options in the short term to follow the trends down. However, watch economic data closely. Any poor economic data can send silver skyrocketing from here. Also, consider trading correlated assets like gold to expand your profits!
[Image Courtesy of Pixabay]