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Silver May Have Bottomed With 2-Year Low, Longs Eye Return of $20

By Barani Krishnan/Investing.comCommoditiesJul 20, 2022 04:59AM ET
www.investing.com/analysis/silver-may-have-bottomed-with-2year-low-longs-eye-return-of-20-200627358
Silver May Have Bottomed With 2-Year Low, Longs Eye Return of $20
By Barani Krishnan/Investing.com   |  Jul 20, 2022 04:59AM ET
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  • Spot silver hit a 2-year low of $18.132 on July 14
  • Silver also in bear market, losing 20% on the year
  • Charts suggest a turnaround from here to $19 and, eventually, $20

After almost four months in the red, silver has had its worst crash since the pandemic, hitting a two-year low in the $18-an-ounce range on July 14.

But is that the bottom?

Charts for the spot price of silver suggest it may be for now, with longs eyeing a return to $19 and, eventually, $20.

Spot Silver Daily
Spot Silver Daily

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

But silver’s plunge into a bear market—compared with the drop of just 7% in gold—also raises questions on how the relative fortunes of the two have gapped this much when they are usually just a few percent apart.

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 each month; losing 8% in April; 5% in May; 6% in June, and 7% so far for July.

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 electronics 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.

But last week’s tumble to a July 2020 low of $18.132 for spot silver also came on the back of a two-decade high in the dollar, which acts as contrarian trade to most precious metals, particularly gold.

Spot Silver Weekly
Spot Silver Weekly

The dollar has been on a tear over the past year as the Federal Reserve embarks on its most aggressive rate hikes in a generation to tame inflation raging at 40-year highs due to trillions of dollars of aid and other stimulus extended during the pandemic.

The Dollar Index, pitted against six major currencies, has declined in just three of the past 12 months and is up more than 11% this year. 

Gold hit a 11-month low of $1,695 last week, responding to the runaway dollar, which has just started retreating in the past three sessions.

Silver’s prior high before the Ukraine war was $30.075, reached on Feb 1, 2021. 

Markets chartist Christian Valencia said in a blog on FXStreet that spot silver was still in a downward bias, though the Relative Strength Index at 31 had exited oversold conditions and could open the door for a test of $19.40.

“However, silver traders would first need to reclaim $19 if they aim to increase prices.”

Michael Boutros, who blogs on precious metals at DailyFX, said rallies in silver should be capped by a monthly open at $20.28.

Spot Silver Monthly
Spot Silver Monthly

Sunil Kumar Dixit, chief technical strategist at skcharting.com, said silver on its present track might not dip beyond $17.90.

He added:

“The positive side of straight seven weeks of a correctional wave is that silver is in oversold conditions with weekly stochastic readings of 7/6 and monthly stochastic readings of 6/6 that call for a technical rebound in the near term.”

He said a weekly close above the 5-week Exponential Moving Average of $19.50 should set up a target for the 200-week Simple Moving Average of $20.50 and eventual demand zones at $21.40-$21.60.

“Beyond these, robust industrial demand would help lift silver over this obstacle zone for higher targets at the 50-week EMA of $22.80.”


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.

Silver May Have Bottomed With 2-Year Low, Longs Eye Return of $20
 

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Silver May Have Bottomed With 2-Year Low, Longs Eye Return of $20

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Comments (13)
Salim
Salim Jul 29, 2022 5:38PM ET
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thanks rebound from 22.....?
mikailu Muhammad
mikailu Jul 22, 2022 12:12PM ET
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How can you help me? Please
mikailu Muhammad
mikailu Jul 22, 2022 12:11PM ET
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A USD thrift saving platform that enables mid to low-income groups to save daily USD amount such as $100 or above over a set period and withdraw a bulk amount in cash, bank transfer. Or mobile money, banking
paul rezford
paul rezford Jul 21, 2022 7:47AM ET
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Suni…we will see what a “few cents” is.  I see it going much lower.  20% from here
Joseph Mead
Joseph Mead Jul 20, 2022 10:20PM ET
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Silver will fall below 17 after the next fomc and thats still overpriced. Demand is in the toilet
mikailu Muhammad
mikailu Jul 20, 2022 3:31PM ET
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I can get your USD $20 year
mikailu Muhammad
mikailu Jul 20, 2022 3:28PM ET
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Hello Good day, I'm heard Glad from you, The money problem in my bank empty please currency dollar USD Transfer, please sir
Robert Flores
Robert Flores Jul 20, 2022 9:34AM ET
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Why put money in other currencies when you can put it usd? Why usd if you can put it slv? Why slv instead of gld? Why gld when btc will outperform them all?
SunilKumar Dixit
SunilKumarDixit Jul 20, 2022 9:34AM ET
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Robert. Traders be like, Moneywise be wise.
John Avenetti
John Avenetti Jul 20, 2022 9:13AM ET
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if it's not obvious to you gold and silver are manipulated, you're not paying attention or you're not very bright
Show previous replies (1)
SunilKumar Dixit
SunilKumarDixit Jul 20, 2022 9:13AM ET
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John Avenetti. Had you followed Barani's previous articles on Gold and Silver, you would obviously understand his stand. He has expressed his observations precisely and accurately.
John Avenetti
John Avenetti Jul 20, 2022 9:13AM ET
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what do you guts do for a living? I've done thus for 26 years and you're lecturing me? lol. ok. knock yourself out. gold and silver as most things are totally contrived and controlled. but go ahead. You're probably voting left and right whilst waring face masks that don't do a GD thing to stop viruses. so many sheep
Barani Krishnan
Barani Krishnan Jul 20, 2022 9:13AM ET
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John Avenetti  It's not for you to ask what we do for a living when it's obvious that you've not been following our coverage enough to comment about what's missing. If you've been doing this for 26 years, then you'd know that not everyday is manipulation day on these markets. Flows do occur naturally too; otherwise, the PMs would not be making any highs at all. You're probably expecting every gold/silver story from us to talk about manipulation from start to end. Also, keep your warped politics out of here. Nobody asked for your views on those.
SunilKumar Dixit
SunilKumarDixit Jul 20, 2022 9:13AM ET
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Barani Sire. Ignore him please. As obvious, someone with 26 years in to this. I wonder if an experienced professional expects wild swings every day. This is what he apparently does for a living. I give him a pass.
Barani Krishnan
Barani Krishnan Jul 20, 2022 9:13AM ET
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SunilKumar Dixit  True. Just out of curiosity, I checked out his history of commenting, and well ... :)
Sam Iam
Sam Iam Jul 20, 2022 8:03AM ET
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Excellent Truthful article by Barani Krishnan. You have an eye for bottoms, that's for sure. Yes, silver bottomed. You can change the words, May Have, to, Has. Silver has bottomed with 2-year Low...
Barani Krishnan
Barani Krishnan Jul 20, 2022 8:03AM ET
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Thanks, Sam. Yes, we came up to $18.9 on silver since the article ran. Near term direction will depend much on the dollar too.
SunilKumar Dixit
SunilKumarDixit Jul 20, 2022 8:03AM ET
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Silver has bottomed at $18 or will most probably bottom out around $17.50 and the same gets affirmation on sustained break above $19.50
 
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