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Despite this week's drop, silver's bad luck is over - Bloomberg Intelligence

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(Kitco News) - Silver’s historic rally this summer, which pushed priced above $30 an ounce, made it the best performing asset so far this year and then this week happened.

Although off its lows, silver prices are down nearly 15% so far this week, its worst performance since 2011. December silver futures last traded at $23.155 an ounce.

However, Mike McGlone, senior commodity strategist at Bloomberg Intelligence, said in a report Thursday that he thinks silver’s seven years of bad luck is over. He added that it is only a matter of time before silver pushes back above $30 an ounce.

“Silver's 2020 trading range of about $12-$30 an ounce could mark the low forever, while the high should eventually be breached, in our view,” he said.

McGlone added that the silver market became overextended in its initial push above $30 an ounce and he sees prices trading in a range between $20 and $25 an ounce.

Sustaining below $20 would be a sign of weakness, while showing comfort above $25 would signal further strength,” he said. We see the latter as more likely.”

McGlone said that silver s price action in recent months is similar to what happened during the 2008 financial crisis. He explained that after an initial rally, silver prices fell to $8 an ounce and have never seen that price again.

The price plunge in March cleansed the market of weak longs and solidified the foundation for a more-enduring price advance,” he said.

The comments come as silver prices have taken a significant hit this past week. A perfect storm of negative news has weighed on the precious metal. First, the entire commodity market has had to deal with rising momentum in the U.S. dollar. The U.S. dollar this week rose to nearly a two-month high as investors fled equity markets and moved into cash.

A second factor was the growing uncertainty surrounding further stimulus measures from the government and the Federal Reserve. Analysts have said that it is unlikely new stimulus measures will be announced before the November 3 general and presidential elections. This has weighed on silver s industrial demand.

The final factor weighing on silver has been falling gold prices. This week, gold prices dropped through $1,900 an ounce and are down nearly $100 or about 5%. Analysts have noted that where gold goes, silver follows.

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