Silver has fallen below $38.50 after reaching a yearly peak of $39.13. This movement is due to the strong US Dollar and recent inflation data. The June Consumer Price Index increased by 2.7% compared to last year, meeting expectations. However, the core CPI was slightly lower at 2.9%. This news has decreased hopes for interest rate cuts, which in turn supports Treasury yields and strengthens the Dollar. Silver’s price is highly responsive to market mood and the strength of the US Dollar. Even with good industrial reports from China and the Eurozone, the strong US economy makes the Dollar more appealing. This has put pressure on Silver, driving it closer to the $38.00 mark. China’s GDP for the second quarter grew by 5.2% year-on-year, slightly beating expectations, while industrial production rose by 6.8%. In the Eurozone, industrial output for May went up by 1.7%, also surpassing forecasts. These factors support Silver demand, which is important for electronics and solar industries. Currently, Silver is under pressure, with key support at $38.00 and resistance at $39.13. The Relative Strength Index stands at 58, showing a loss of momentum. Silver prices are affected by various elements, including industrial demand, US Dollar movements, and changes in Gold prices. Given the current situation, we view the recent drop as a crucial phase of consolidation rather than a trend change. For traders dealing with derivatives, this moment calls for a careful strategy rather than bold bets. The main force limiting gains is the strong US Dollar, with the Dollar Index (DXY) climbing above 106.5, its highest in months. This strength stems from a strong US job market, highlighted by a Non-Farm Payroll report showing 272,000 new jobs added, which lowers hopes for aggressive rate cuts anticipated in the silver market. This economic pressure presents a strategic balancing act against strong industrial demand. Recent data from The Silver Institute suggests that solar demand alone will use about 20% of the global silver supply this year. This is not a distant prediction; it’s a current reality that supports prices when they approach lower levels. Positive industrial data from Asia and Europe is significant and establishes a solid base for the market. Historically, silver struggles during periods of high real interest rates, but the current industrial demand presents a new and powerful factor that wasn’t as clear in prior cycles. In the coming weeks, we plan to trade based on the market’s range and volatility. Given the loss of momentum indicated, pursuing upside with simple call options could be costly and risky. Instead, we consider strategies like bull call spreads—buying a $38.00 call and selling a $39.50 call. This approach limits our risk and targets a recovery towards recent highs without needing a major surge. Additionally, the latest Commitment of Traders report shows that managed money has reduced its net-long positions, suggesting profit-taking and a less crowded market. This indicates a chance for us to position ourselves for the next upward move, using the $38.00 support as our strategic benchmark. A sustained drop below this level would prompt a reassessment, but for now, we view the weakness as an opportunity to build positions that can benefit from the inevitable clash between monetary policy and physical demand.

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