We’ve seen a rough start to the week for the price of silver (SLV), with the metal down more than 2% to start the week. Overall, 2021 has been disappointing for the metal given the Fed's dovishness and rising inflation. Taylor Dart explains why the Fed meeting could be crucial.We’ve seen a rough start to the week for the price of silver (SLV), with the metal down more than 2% to start the week, sliding below critical support at $24.75/oz. While there’s still lots of time left in the week for the metal to recover, a weekly close below $24.75/oz would be a negative development, increasing the probability of a re-test of the $22.00/oz support, which was most recently tested in December. The good news is that sentiment continues to trade in a zone where we have seen bottoms previously, and the metal remains short-term oversold, down for its fourth consecutive week in a row. However, an inability to rally from oversold levels can often be a negative sign, so the bulls will need to step up and start playing defense here immediately.
(Source: Daily Sentiment Index Data, Author’s Chart)
Since the second week of July, we’ve had all of the conditions in place for a short-term bottom in the price of silver, including depressed sentiment, as shown above. Typically, when bullish sentiment for silver has declined below 30%, we have seen violent rallies in the price of silver, with the metal returning 15% or more over the following three months. However, the most recent decline in bullish sentiment has been met with more selling, with silver unable to hold onto its 200-day moving average and continuing to make new lows below its recent oversold signal.