Silver price analysis is a popular topic among traders and investors who follow the precious metal market. Silver is known for its volatility and potential for hedging against inflation and currency devaluation. However, silver has been under pressure lately, falling below the $24 level for the first time in over a month. What are the reasons behind this decline and what can we expect from silver in the near future?
One of the main factors that influence silver prices is the performance of gold, which is often seen as a store of value and a safe-haven asset in times of uncertainty. Gold and silver tend to move in tandem, as they share similar demand and supply dynamics. However, silver also has a significant industrial component, as it is used in various sectors such as electronics, solar panels, medical devices, and more. This makes silver more sensitive to the global economic outlook and industrial activity.
In recent weeks, gold prices have been weighed down by several factors, such as the strengthening of the US dollar, the rise in US Treasury yields, and the optimism about the Covid-19 vaccine rollout and economic recovery. These factors have reduced the appeal of gold as a hedge against inflation and currency depreciation, as well as a safe-haven asset. As a result, gold prices have dropped from above $1,900 per ounce in January to below $1,700 per ounce in March.
Silver prices have followed suit, as they have also faced downward pressure from the stronger dollar and higher yields. Moreover, silver prices have been affected by the slowdown in industrial demand due to the resurgence of Covid-19 cases in some regions and the supply chain disruptions caused by the winter storm in Texas. Silver prices have fallen from above $28 per ounce in February to below $24 per ounce in March, breaking below a key support level.
Silver price analysis: The technical outlook
From a technical perspective, silver prices have entered a bearish trend after failing to break above the $26 resistance level several times in February and March. The price has also breached below the 50-day and 100-day moving averages, indicating a loss of momentum and a shift in sentiment. The RSI indicator is hovering near the oversold territory, suggesting that silver prices may be due for a short-term bounce or consolidation. However, the MACD indicator is still in negative territory and showing no signs of a bullish crossover, implying that the downward pressure may persist.
The next support level to watch is around $23.50, which coincides with the 200-day moving average and a previous low from December 2020. A break below this level could open the door for further losses towards $22.50 and $21.00, which are also previous lows from November 2020 and September 2020 respectively. On the upside, the first resistance level is around $24.50, which corresponds to the 100-day moving average and a previous support level. A break above this level could trigger a recovery towards $25.50 and $26.00, which are also previous resistance levels.
Silver price analysis: The fundamental outlook
Looking ahead, silver prices may continue to face headwinds from the stronger dollar and higher yields, as well as the uncertainty about the industrial demand amid the Covid-19 pandemic. However, there are also some positive factors that could support silver prices in the medium to long term, such as:
– The stimulus measures from governments and central banks around the world, which could boost inflation expectations and increase the demand for precious metals as a hedge.
– The green energy transition, which could boost the demand for silver as a key component of solar panels and other renewable energy technologies.
– The supply constraints, which could limit the availability of silver and create a supply-demand imbalance that could drive up prices.
Therefore, silver prices may experience some volatility and weakness in the short term, but they may also find some support and opportunities in the longer term.