By FXEmpire.com

The silver markets fell hard on Monday as the “risk off” attitude came back in to the markets. Unlike gold, silver has many purposes. This may have been part of the move for the session as the possible lack of industrial demand can come into play and have a negative effect on the price of this market. With this being said, there are a lot of other factors as well that can come into the market and determine the price of silver.

Silver can be a play against inflation, much like gold. As a general rule, if the US dollar is falling, this market can rise over time. The silver markets can also rise if the economic expansion of the world looks healthy. Because of this, the reasons why silver may or may not gain over time aren’t always clear. As a rule, it is best to pay attention to the US dollar as a barometer of the reasons pushing this market. Also, if the gold market is rising or stable while this one falls, this can often mean that people are buying gold for the “safety trade”, and as a result this metal will underperform because of the industrial component. This is exactly what we saw on Monday.

The breaking of the $31 level is something to concern the bulls, but the support level extends all the way down to the $30 mark. In fact, it is best thought of as a “zone” that should be supportive. The market begins to look very weak on a break below that level, and at that point we would have to start selling silver overall. However, as things stand at the end of Monday, we haven’t broken down quite enough to start selling yet. In fact, until the $30 level gives way, we have to assume that the bulls will step back in and move prices upwards again.

It does look like there is significant bearish pressure on this market though. It is because of this that a breakdown wouldn’t surprise us at all. In fact, our best defense against this is going to be waiting for a daily candle to close below the $30 mark in order to sell. Also, a daily close with a hammer or bullish engulfing candle has us buying as it would show that the level held up.

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Originally posted here