Silver prices have been trading in a narrow range in recent days, despite several technical indicators favoring bullish traders. On Friday, silver bounced back from the 200-hour Simple Moving Average (SMA) but failed to capitalize on the momentum and has since been oscillating in a tight trading band. As of writing, the white metal is trading around the $25.65-$25.70 region, nearly unchanged for the day.
The technical setup favors bullish traders, as silver is trading above the 50-day and 100-day SMAs, and the Relative Strength Index (RSI) is above 50, indicating an upward momentum. However, the lack of volume and the strength of the US dollar are keeping silver prices in check.
Possible reasons for silver’s narrow trading range
One possible reason for silver’s lackluster performance could be the recent strength of the US dollar. The greenback has been on an upward trend in recent weeks, fueled by a surge in US Treasury yields and expectations of a strong economic recovery. As silver is priced in dollars, a stronger dollar makes the metal more expensive for foreign buyers, reducing demand and putting downward pressure on prices.
Another reason for silver’s narrow trading range could be the lack of volume in the market. Many traders are still on the sidelines, waiting for clearer signals on the direction of the market. The ongoing uncertainty surrounding the COVID-19 pandemic, geopolitical tensions, and inflation fears are keeping investors cautious.
What to expect in the coming days?
Despite the current lackluster performance, several indicators suggest that silver prices could rise in the coming days. The RSI remains above 50, indicating an upward momentum, and the 50-day and 100-day SMAs are acting as strong support levels.
Moreover, the ongoing economic recovery and the massive stimulus measures announced by central banks worldwide are likely to boost demand for industrial metals such as silver. Silver is widely used in the manufacturing of solar panels, electronics, and batteries, making it an essential component of the green energy revolution.
In conclusion, while silver’s narrow trading range may be discouraging for traders, several technical indicators suggest that the white metal could still rise in the coming days. However, traders should remain cautious and closely monitor the strength of the US dollar, as well as any developments in the global economic and political landscape.