The price of silver has moved to twelve-week trading high, amidst a strong rally in the price of gold and other precious metals as safe-haven assets come back into favour over fears about rising COVID-19 cases in parts of Asia and India.
Traders have been increasingly looking to the shiny-metal over recent weeks, with silver prices now fully on course to post six-weeks of gains over the last seven weeks. Silver prices have advanced by nearly $5.00 in just over four-weeks.
July silver futures also received strong buying interest at the start of the week, with many sources reporting increased volume, and so-called “real money” pilling into the silver long trade, which is typically a very bullish sign.
International markets could also be reacting to the situation in Israel, which could turn into a more serious conflict as the bombing shows few signs of stopping between both sides. The situation also has the potential to worsen.
Silver and gold prices tend to benefit during times of war, especially silver, which is used in artillery. With a physical supply glut underway, silver looks poised for further gains. Furthermore, commodity prices are generally rising sharply, so precious metals are likely to benefit from his trend.
Just to add to the bullish catalysts, the ongoing pullback in the greenback is starting to benefit gold and silver. Gold funds are also seeing strong inflows as Bitcoin and a number of top altcoins slump heavily into the red for the month.
According to the ActivTrader Market Sentiment tool retail traders remain on the right side of the trade. The bullish sentiment bias remains unchanged with 81 percent of traders still predicting further upside.
I have my concerns about the extreme bullish sentiment. Potentially, bulls could exit the uptrend too early if silver crosses $30.00 and explodes higher. It is noteworthy that retail traders typically exit bullish trends too early, so potentially, this could just be the start of the uptrend.
Silver short-term Technical Analysis
The short-term technicals for silver show that an inverted head and shoulders pattern has been activated, following the recent price advance above the $28.30 resistance zone.
The size of the pattern implies that a move of close to $5.00 could take place, with the $33.30 level the short-term target.
I believe that once silver crosses the $30.00 resistance level the metal could easily explode towards the $33.30 level, and possibly even the $35.00 level.
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Silver Medium-term Technical Analysis
The daily time frame shows that a huge, inverted head and shoulders pattern will be activated once silver crosses the $30.00 level. The size of the pattern implies that silver could be headed towards the $39.00 to $40.00 level.
Fibonacci analysis shows that the 61.8 percent Fibonacci retracement of the 2020 low to the all-time price high is found around the $35.00 level. This would be my first price target, with the 78.6 Fibonacci retracement my next target, at $42.00.
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