Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

Is The Silver Turnaround Here? Or Will The Abyss Deepen?

By Barani Krishnan/Investing.comCommoditiesSep 02, 2022 04:23AM ET
www.investing.com/analysis/is-the-silver-turnaround-here-or-will-the-abyss-deepen-200629317
Is The Silver Turnaround Here? Or Will The Abyss Deepen?
By Barani Krishnan/Investing.com   |  Sep 02, 2022 04:23AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
XAG/USD
-0.67%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
Silver
-0.54%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
XAU/USD
-0.36%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
DX
+0.31%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
Gold
-0.08%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
US10Y...
+0.06%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
  • The spot price of silver hit a 27-month low of $17.56 on September 1
  • Silver is worst performing metal and third worst commodity
  • Charts suggest a turnaround from here to $18, but hold will be tenuous

The believers of silver just can’t seem to catch a break after spending four of the past five months in the red. The first session of September itself delivered a 27-month low for the industrial metal also branded as precious.  

Both spot silver and silver futures are in bear market territory now, their 24% stumble on the year exceeding the minimum 20% drop from a recent high that a market needs to be to fit into that category. 

Besides that, silver is also the worst performing metal for the year and the third worst performing commodity after lumber (-56% ) and oats (45%).

Spot Silver Daily
Spot Silver Daily

Charts by skcharting.com with data powered by Investing.com

One reason silver is having such a terrible year is because of the weakness in gold, which translates to a lack of a safe haven attraction for precious metals now versus the dollar and yields on 10-year US Treasuries. 

This dynamic has worsened since the Federal Reserve’s interest rate hikes, which began in March, became more aggressive as the central bank attempts to fight back inflation raging at four-decade highs. 

The Fed’s rate hikes have also triggered fears that the US economy will be dragged into a deeper recession in the coming months. As silver is largely an industrial metal, it suffers from any recession threat, which might include a slowdown in the job market. 

Silver’s tumble on Thursday to a 27-month low of $17.56 per ounce came ahead of the US August jobs report due today. The Fed is keeping a close watch on labor data to gauge how much tolerance the job market will have toward higher interest rates. 

Economists think the United States added some 300,000 jobs in August holding the unemployment rate steady at 3.5% for a second straight month. A jobless rate of 4% or below is seen by the Fed as full employment.

Unemployment among Americans reached a record-high rate of 14.8% in April 2020, with the loss of some 20 million jobs after the COVID-19 breakout. Since then, hundreds of thousands of jobs have been added every month, with the trend not letting up in July despite a negative 0.6% growth in second-quarter gross domestic product this year, after a minus 1.6% in the first quarter that together accounted for a recession.  

US inflation itself has been running at around four-decade highs since late last year, although the closely-watched Consumer Price Index slowed to an annualized rate of 8.5% in July from a peak of 9.1% in June. 

The Fed’s target for inflation is a mere 2% a year and it has vowed to raise interest rates as much as necessary to achieve that. Rate hikes are anathema particularly to gold, which some of the biggest investors buy as a hedge against inflation. 

So silver is getting screwed on both ends: first as an industrial metal impacted by recession fears and secondly as a precious metal that doesn’t have an attractive safe-haven proposition now. 

Christopher Lewis, who blogs on precious metals at FXEmpire, said the forecast for silver “continues to look horrible.” Adding: 

“A bounce from here could be an opportunity for short-term buyers, but I just don’t see how the trend changes with the strengthening US dollar. 

“Remember, the US dollar tends to move in a negative correlation to the silver market, so you need to be aware of the fact that the US Dollar Index is something that you should be paying close attention to, as well as interest rates in America as they can drive the currency higher.” 

 “Ultimately, this is a market that I would rather fade rallies given an opportunity, but we will have to wait and see whether or not we get that possibility.”

Since its March peak of above $26 an ounce that came on the back of the big commodities rally triggered by Russia’s invasion of Ukraine, silver has slid steadily in five of the past six months. It lost 8% in April, 5% in May, 6% in June, nearly 12 % in July and 0.2% so far for August.

Uncertainty in industrial demand for silver amid growing fears of a recession in the United States is responsible for much of that.

More than 50% of silver’s demand originates from industrial use. As a malleable metal, it is just as good as gold for jewelry making. It is also a good conductor of electricity, and used extensively in the manufacture of electronic components.

The transition to clean energy had also been expected to drive physical demand for silver, particularly for connections in electric vehicles and for components within solar panels. The rollout of fifth generation (5G) telecom networks was seen as another substantial source of demand. 

Spot Silver Weekly
Spot Silver Weekly

So is $17.56 the bottom now for silver? Or will it descend deeper into the abyss?

Sunil Kumar Dixit, chief technical strategist at SKCharting.com, says the spot price of silver could bounce back in the near—term to $19.

“On the surface, silver has been trading below an ascending $2 height channel that targets a further drop to $16.90." 

“But there’s also a positive overlap in the oversold Daily Stochastics of 11/7 that may cause a short-term recovery to $18.16 -$18.66 -$18.96.”

“Then again, this recovery may fizzle out if bears find it vulnerable again at the test of $18.96 and $19.44 swing high.”

Dixit added that renewed selling could also push silver below $16.

“If momentum continues to be bearish, we expect a drop to $15.58, which is a 78.6% Fibonacci retracement of silver’s previous upswing from $11.64 to $30.075.”


Disclaimer:
Barani Krishnan uses a range of views outside his own to bring diversity to his analysis of any market. For neutrality, he sometimes presents contrarian views and market variables. He does not hold a position in the commodities and securities he writes about.

Is The Silver Turnaround Here? Or Will The Abyss Deepen?
 

Related Articles

Blake Morrow
Chart Of The Day: Gold By Blake Morrow - Oct 04, 2022 2

The break higher in gold today suggest that while we trade above the 1700 level, the risk is for a move higher, towards the 1736 level and possibly the 200-day moving average in...

Phil Flynn
The Energy Report: OPEC’s Revenge By Phil Flynn - Oct 04, 2022 5

OPEC is getting ready to send a message to the Biden administration that they’re going to lose the oil war that they started with the cartel last November. The Biden administration...

Is The Silver Turnaround Here? Or Will The Abyss Deepen?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (10)
Abhay Agrawal
Abhay Agrawal Sep 03, 2022 4:49AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
sir its a totally speculative metal,on 12th August friday it closed on monthly high 2085 and gap down open on 15th and within a span of 19 days it was at yearly low of 1756 on 1 September.in this case what can a technical analysts can do in 16 trading days 326 cents or more than 18%down fall.
Abhay Agrawal
Abhay Agrawal Sep 03, 2022 4:34AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Barani Krishnan sir first of all thanks for the article, secondly I have a query we talk a lot about inflation.but crude oil is no where near its life time highs,silver is at 2008 levels, wheat is half of its highs so is gasoline and soyabean.so what is the criteria of inflation.if wages are not growing than people with complaint of it.if House prices and rents are not growing than people again argue on it.so please let help in this regard.we the people of Asia are habitual of inflation because most of the products excluding food grains and clothing are imported from other countries and Indian rupee always depreciates against the dollar making the imports costly so we have no choice.but in USA from a strong dollar thier imports are cheaper and most of the products are their own manufacturing so why does they cry on inflation.
Stop Lost
Stop Lost Sep 02, 2022 10:27AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
silver is "autism money"
ge Kret
ge Kret Sep 02, 2022 8:16AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
AAL rally today 🚀
Kent Beason
Kent Beason Sep 02, 2022 8:11AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
it will be a brief and violent abyss to close the gap. then vertical.
Barani Krishnan
Barani Krishnan Sep 02, 2022 8:11AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thanks for that perspective, Kent.
James Johannsen
James Johannsen Sep 02, 2022 8:06AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Dow to gold ratio 19 to 1 silver to gold ratio 95 to 1, historically the ratio is 16 to 1 so silver has tremendous upside
Barani Krishnan
Barani Krishnan Sep 02, 2022 8:06AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thanks for that insight, James!
Mt Le
Mt Le Sep 02, 2022 7:59AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Nice to know. Thank you.
مهندس سعید بهزادیان
مهندس سعید بهزادیان Sep 02, 2022 7:46AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
hi frendes
Upendra Desai
Upendra Desai Sep 02, 2022 7:19AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
thanks 🙏 for proper guidance and i believe you will right this short term bull really
Barani Krishnan
Barani Krishnan Sep 02, 2022 7:19AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thanks much, Upendra. It's readers like you who keep me going.
Hunt Richardson
Hunt Richardson Sep 02, 2022 4:50AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
real rates need to be low and demand for the commodity needs to be high in order for it to sustain higher prices
SunilKumar Dixit
SunilKumarDixit Sep 02, 2022 4:50AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
True. And that not going to happen anytime soon.
James Johannsen
James Johannsen Sep 02, 2022 4:50AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
the comex is getting drained at a rapid pace
Barani Krishnan
Barani Krishnan Sep 02, 2022 4:50AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
James Johannsen  Yes, that appears to be the case. Thanks to you and Hunt for your thoughts.
trevor hron
trevor hron Sep 02, 2022 4:50AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
James Johannsen It makes me wonder how long they will be able to sustain this price with reserves being depleted so quickly.
Barani Krishnan
Barani Krishnan Sep 02, 2022 4:50AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
trevor hron  Very good question. $18 and above seems reasonable.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email