Silver price has been largely battered over the past three months. Investors are keen on whether this is a buying opportunity or if its is time to close the trade. A look at both the technicals and fundamentals signals that the bearish outlook may persist in the short term.
As has been the case in recent weeks, the rallying of the US dollar has not made it easy on silver price and the broader commodities class of assets. Granted, the greenback is overstretched; having hit a fresh 20-year high in the past week. Even so, the heightened inflationary pressures and bets that the Fed will continue with the aggressive tightening of its monetary policy is set to sustain the currency’s strength in the short-term.
Besides, slowed economic growth at a global level and concerns over the possibility of a recession is a major bearish driver for silver price and other industrial metals. China, the leading consumer of industrial metals, is grappling with the surge in COVID19 cases. Earlier in the week, it the recorded new infections hit its highest level in two months at over 1,000 cases.
Silver price technical analysis
Silver price has dropped by over 30% since early March when it hit a 9-month high at $26.96. Since earlier in the month, it has been trading below the critical support-turn-resistance zone of $20.
On a four-hour chart, it remains below the 25 and 50-day exponential moving averages. Besides, a look at the RSI shows that it has largely been below the neutral level of 50 for about a month now. The descending trendline, which is highlighted in purple, further highlights the bearish outlook.
Based on these technical indicators, coupled with the fundamentals, I expect silver price to remain under pressure in the short term. Indeed, am of the opinion that the psychological level of $20 will remain evasive in the ensuing sessions.
With this in mind, the range between the support level of $18.45 and resistance zone of $18.75, which is along the 25-day EMA will be one to look out for in the immediate term. Below the range’s lower border, $18.17 and the psychological level of $18.00 will be viable support levels. Even with a probable rebound, it may continue to trade below the 50-day EMA at $18.89 as it remains below the descending trendline.