
Please try another search
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.
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.
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.
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.
EU attempting to revive Iran nuclear deal with market staying pessimistic Crude prices could rebound from oversold conditions but stay off 2022 highs Both Iran, US likely looking...
After 18 months of negotiations, progress has been made in reviving the Iran nuclear deal. We’ve been here before and have seen talks fall apart. What is a little...
The recent movement of natural gas on the daily chart indicate the final attempt by the bulls to try to test the recent $9.665 on June 8, 2022, but found it difficult to breathe...
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.
I feel that this comment is:
Thank You!
Your report has been sent to our moderators for review
Add a Comment
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.
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.