Is a Silver Lining Materializing for Invesco's DBS ETF?

Precious metals saw some positive news during Wednesday’s trading session, which could help move silver prices out of their sideways consolidation phase and see ETFs like the Invesco DB Silver Fund (DBS) resume an upward trajectory.

Precious metals investors will be keeping a keen eye on inflation. Fears of rising inflation have helped to spark heavy volatility the past couple of weeks.

“The U.S. Dollar Index has recently managed to get below the support at 92 and is moving towards the next support level which is located at 91.75,” an FX Empire article noted. “The U.S. has recently reported that Core Inflation Rate increased by 1.3% year-over-year on February compared to analyst consensus which called for growth of 1.4%. Weaker-than-expected inflation data put pressure on Treasury yields and the U.S. dollar, which is bullish for silver and gold price today (March 10).”

DBS seeks to track the DBIQ Optimum Yield Silver Index Excess Return, which is intended to reflect the changes in the market value of silver. Additionally, the fund holds Treasury Securities, money market mutual funds, and T-Bill ETFs for margin and/or cash management purposes only.

DBS Chart

Price Action Will Dictate Further Strength

In addition to economic fundamentals, price action will also help predict further strength for silver. The precious metal managed to break through a key resistance level and momentum indicators are showing a possible buying opportunity at the present.

“Silver managed to get above the resistance at $25.85 and is trying to settle above the $26 level. If this attempt is successful, silver will move towards the next resistance level which is located at the 50 EMA at $26.30,” the FX Empire article said. “In case silver gets above this level, it will test the 20 EMA at $26.40. A move above the resistance at the 20 EMA will push silver towards the next resistance level at $26.70. If silver manages to settle above this level, it will head towards the resistance at $27.00.”

The middle of June saw the ‘golden cross’ appear for DBS as the 50-day moving average crossed up the 200-day moving average. Since then, DBS has risen about 44%.

Momentum indicators can help prospective investors find a potential area of value for purchasing. Right now, the relative strength index (RSI) is registering a reading of 47.71 in its one-year chart, which is closer to oversold levels.

The stochastic relative strength index (StochRSI) can be used in similar fashion. In the same one-year chart, the reading also registers a level closer to oversold, indicating a potential buying opportunity.

DBS Chart

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