Silver prices have remained under pressure as the shiny-metals failed to rally last week, amidst a big sell-off in global markets after Federal Reserve Chairman Jerome Powell said he expects policymakers in December to discuss accelerating the timetable for the tapering of monthly bond purchases.
Price for precious metals are ultra-sensitive to tapering, and an acceleration of tapering could place major downside pressure on silver over the coming month. Speaking before Senate panel last week Powell said tapering could wrap up “a few months sooner” than anticipated. That would open the door to interest rate hikes thereafter.
Chair Powell also said “it’s probably a good time to retire” the word “transitory” to describe inflation. This is bad news for silver prices, and the fact that the metal cannot rally could be hinting that a major down move is coming into year-end as the FED looks set to taper further.
Silver prices became turbo charged after an initial price collapse following the announcement of QE in 2020. This year the metal has become extremely lacklustre and has been sold broadly on any price rallies. Silver was sold heavily during its recent move towards the $25.00 level.
Another factor is the US dollar currency. The greenback is strengthening broadly on the foreign exchange placing further downward pressure on metal as the world’s reserve currency comes into favour with investors, despite the US economy having its own problems right now.
I would suggest keeping a close eye on the $22.00 to 21.00 area if silver prices continue to sink. Weakness under this area and silver prices could have a major downward price move towards $18.00 or even $16.00.
The ActivTrader market sentiment tool continues to show that some 94 percent of traders are bullish towards silver right now. This metric has stabilized around ultra-high levels and does not bode well for silver prices as the retail crowd is often wrong and has poor market timing.
Silver short-term Technical Analysis
The short-term technicals for silver show that a breakout has taken place under key trendline support, and the metal is likely to remain pressure while trading below the $23.50 level.
According to technical analysis silver prices could stage a final move towards the $23.00 level. This could be a major turning point for silver, and failure here could cause a significant price collapse.
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Silver Medium-term Technical Analysis
The daily time frame shows that the shiny metal is trading towards the neckline of a large head and shoulders pattern, which holds a massive downside price target of around $9.00.
According to technical analysis silver could be headed towards the $13.00 level if bulls are able to move the price under the $21.00 level. A break under the $21.80 should start the selling, and we could then see downside pressure accelerate.
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