NEW YORK ( TheStreet) -- Silver is expected to demonstrate bullish momentum this week, supported by technical indicators and a weak dollar.

U.S. economic data releases this week could indicate a slowdown in the economy, further weakening the dollar. Nonfarm payrolls may show 60,000 job cuts, accelerating the unemployment rate to 9.6% in July. Moreover, declining manufacturing and construction spending coupled with a drop in factory orders may pressure the dollar. Growth in personal incomes and personal spending may deteriorate as well. However, relief may come in the form of rising pending home sales and increasing auto sales, which could give modest support to the greenback.

Continued weakness in the dollar may increase the demand for silver and gold as alternative investments. Gold may try to regain lost ground after its posting biggest monthly losses in July.

Silver could find support this week from technical indicators. Last week, COMEX silver found support at $17.31 an ounce and ended flat above $18, a key psychological mark. The white metal is likely to gain support at 45 weekly exponential moving averages and is set to trade higher this week. In addition, the RSI momentum indicator is currently at 0.49, confirming the bullish trend in silver.

Silver tracked gold last week and shed more than 0.5% to hover at $18 per ounce. Silver failed to take cues from base metals, which advanced by more than 4.5% on the London Metal Exchange. Meanwhile, gold took a heavy toll at the beginning of the week when prices slumped below the key support level of $1,175 per ounce, which later triggered a wave of technical selling. Prices fell to near three-month lows of $1,157.50 during the week and hovered below the $1,200 mark through the week. Although gold regained lost ground, it closed at $1,182.40 per ounce, down 0.61%.

The gold-silver ratio increased to 65.64 from 65.62. Meanwhile, silver prices for spot delivery on the COMEX closed at $18.01 per ounce, while futures ended at $18 per ounce, suggesting that silver prices are in backwardation. Whereas, COMEX gold prices for spot delivery closed at $1,181 per ounce, while futures ended at $1,182.4 per ounce, indicating that gold prices are in contango.

The calendar spread, the difference of the two futures contracts, between silver Sep'10 and Dec'10 continued to remain thin at -0.051, signifying that the far-month contracts closed higher than the near-month contracts. Meanwhile, the calendar spread between gold Aug'10 and Oct'10 contracts closed at -1.50 in the past week.

Among major silver producers, Silver Standard Resources ( SSRI) and our top silver stock pick for the past few months Silver Wheaton ( SLW) were up 1.4% and 0.4%, respectively, last week.

Meanwhile, Compania de Minas Buenaventura ( BVN), Coeur d'Alene Mines ( CDE), Pan American Silver ( PAAS), Mag Silver ( MVG), Endeavour Silver ( EXK), and Hecla Mining ( HL) declined 2.5%, 1.6%, 1.0%, 1.0%, 0.3% and 0.2%, respectively.
Karvy Global Services (www.karvyglobal.com), a subsidiary of the Karvy group (www.karvy.com), provides specialized research in asset classes including stocks, mutual funds and insurance to leading Wall Street firms.

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