Silver Price Forecast: Flagging at Yearly Lows

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Silver Price Outlook:

  • A bear flag in silver costs could also be forming across the 61.8% Fibonacci retracement of the 2020 low/2021 excessive vary.
  • A transfer above the each day 8-EMA – which hasn’t occurred since June 21 – would recommend {that a} extra important rebound is happening.
  • However, recent adjustments in sentiment recommend that silver costs have a bearish bias within the near-term.

Recession, Real Yields, and the US Dollar

Global recession issues aren’t going wherever, neither is the torrent of price hikes levied by main central banks to fight multi-decade highs in inflation charges in developed economies. But the previous week has produced modest US Dollar (through the DXY Index) weak point, and US actual yields have stopped climbing in the interim. The net-result has been a interval of relative calm for silver costs, which simply final week fell to a recent yearly low. While the worst might not be over for silver costs, it will be silly to dismiss the potential for a minor restoration earlier than extra promoting takes place.

Silver Prices and Volatility Relationship Still Weak

Both gold and silver are treasured metals that usually take pleasure in a secure haven enchantment throughout instances of uncertainty in monetary markets. While different asset courses don’t like elevated volatility (signaling larger uncertainty round money flows, dividends, coupon funds, and so forth.), treasured metals have a tendency to profit from intervals of upper volatility as uncertainty will increase silver’s secure haven enchantment. A lackluster volatility setting in US equities isn’t doing a lot for silver costs within the near-term.

VIX (US S&P 500 VOLATILITY) versus Silver Price TECHNICAL ANALYSIS: DAILY PRICE CHART (July 2021 to July 2022) (CHART 1)

US stock market volatility (as measured by the US S&P 500 volatility index, VIX, which tracks the stock market’s expectation of volatility based mostly on S&P 500 index choices) was buying and selling at 23.30 at the time this report was written. The 5-day correlation between the VIX and silver costs is 0.00 and the 20-day correlation is -0.18. One week in the past, on July 14, the 5-day correlation was -0.84 and the 20-day correlation was -0.19.

SILVER PRICE TECHNICAL ANALYSIS: DAILY CHART (July 2021 to July 2022) (CHART 2)

Silver Price Forecast: Flagging at Yearly Lows - Levels for XAG/USD

After setting a recent 2022 low one week in the past, silver costs have largely traded sideways, neither making a major effort decrease nor really staging a rebound. It’s doable {that a} bear flag is forming across the 61.8% Fibonacci retracement of the 2020 low/2021 excessive vary at 18.7064. Silver costs stay contained beneath their each day 5-, 8-, 13-, and 21-EMA envelope, which stays in bearish sequential order. Both each day MACD and each day Slow Stochastics have began to rise, however stay well-below their respective median strains. A detailed above the each day 8-EMA – which hasn’t occurred since June 21 – could be the primary signal {that a} extra important rebound is happening. A drop beneath final week’s low of 18.1423 would kickstart the subsequent leg decrease.

SILVER PRICE TECHNICAL ANALYSIS: WEEKLY CHART (November 2010 to July 2022) (CHART 3)

Silver Price Forecast: Flagging at Yearly Lows - Levels for XAG/USD

The longer-term outlook stays bearish, even when a short-term rebound transpires. “Having broken the 61.8% Fibonacci retracement of the 2020 low/2021 high range at 18.7064, a more significant reversal may still transpire yet. The next level lower would the 76.4% Fibonacci retracement at 16.0061. Silver prices are below their weekly 4-, 8-, and 13-EMAs, and the EMA envelope is aligned in bearish sequential order. Weekly MACD is trending lower below its signal line, while weekly Slow Stochastics remain in oversold territory. It holds that confidence remains high in the idea that the path of least resistance is lower.”

IG CLIENT SENTIMENT INDEX: SILVER PRICE FORECAST (July 21, 2022) (CHART 4)

Silver Price Forecast: Flagging at Yearly Lows - Levels for XAG/USD

Silver: Retail dealer information reveals 93.30% of merchants are net-long with the ratio of merchants lengthy to brief at 13.92 to 1. The variety of merchants net-long is 1.20% increased than yesterday and 4.44% increased from final week, whereas the variety of merchants net-short is unchanged than yesterday and 69.92% decrease from final week.

We usually take a contrarian view to crowd sentiment, and the very fact merchants are net-long suggests Silver costs could proceed to fall.

Traders are additional net-long than yesterday and final week, and the mix of present sentiment and up to date adjustments offers us a stronger Silver-bearish contrarian buying and selling bias.

— Written by Christopher Vecchio, CFA, Senior Strategist





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