Silver Price Forecast: Rising US Real Yields Continue to Weigh

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Silver Price Outlook:

  • Silver costs stay below stress as US actual yields rise additional, supporting a stronger US Dollar.
  • Momentum has turned extra bearish, and a retest of the yearly lows at 18.1423 might not be far forward.
  • In flip, recent modifications in sentiment counsel that silver costs now have a bearish bias.

Headwinds Strengthening

The resurgent US Dollar (through the DXY Index) and the continued rise in US yields – each nominal Treasury and actual – stay obstacles for silver costs within the near-term. In phrases of the latter, the US 10-year actual yield is up from +9-bps on August 1 to +46-bps as we speak, its highest stage since July 21; traditionally, rising US actual yields have a destructive correlation with silver costs. With world recession issues proliferating as central banks elevate charges to fight rising inflation – and with worth pressures seemingly to rise into year-end as the worldwide power provide disaster unfolds – the headwinds silver costs have confronted are solely strengthening within the near-term.

Silver Prices and Volatility Relationship Still Weak

Both gold and silver are treasured metals that usually take pleasure in a protected haven attraction throughout instances of uncertainty in monetary markets. While different asset lessons don’t like elevated volatility (signaling better uncertainty round money flows, dividends, coupon funds, and so forth.), treasured metals have a tendency to profit from durations of upper volatility as uncertainty will increase silver’s protected haven attraction. The undeniable fact that equity market volatility rose in the beginning of this week with out silver costs benefiting was a priority.

VIX (US S&P 500 VOLATILITY) versus Silver Price TECHNICAL ANALYSIS: DAILY PRICE CHART (August 2021 to August 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 23.22 on the time this report was written. The 5-day correlation between the VIX and silver costs is +0.69 and the 20-day correlation is -0.15. One week in the past, on August 17, the 5-day correlation was +0.58 and the 20-day correlation was -0.23.

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

Silver Price Forecast: Rising US Real Yields Continue to Weigh - Levels for XAG/USD

Last week it was famous that “a drop below the August low at 19.5519 would open the door for a return to the yearly lows at 18.1423.” This situation was achieved, growing the probability of a return to the lows of 2022 within the near-term. Silver costs are beneath their every day 5-, 8-, 13-, and 21-EMA envelope, which is in bearish sequential order. Momentum stays weak, with every day MACD trending decrease beneath its sign line, whereas every day Slow Stochastics are holding in oversold territory. More losses can’t be dominated out within the fast future.

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

Silver Price Forecast: Rising US Real Yields Continue to Weigh - Levels for XAG/USD

Nothing has modified for the longer-term perspective. “Despite the recent rebound, there is an argument to be made that the longer-term outlook remains bearish. Prior to the late-July rally, silver prices broke the 61.8% Fibonacci retracement of the 2020 low/2021 high range at 18.7064, suggesting that the bull run in 2020 and 2021 ended. Silver prices are still below their weekly 4-, 8-, and 13-EMAs, and the EMA envelope is aligned in bearish sequential order. Weekly MACD is on the verge of issuing a bearish crossover while below its signal line, and weekly Slow Stochastics have failed to return above their median line. It may be the case that the path of least resistance is lower, particularly if US real yields remain elevated and the US Dollar rebound gathers pace.”

IG CLIENT SENTIMENT INDEX: SILVER PRICE FORECAST (August 24, 2022) (CHART 4)

Silver Price Forecast: Rising US Real Yields Continue to Weigh - Levels for XAG/USD

Silver: Retail dealer information exhibits 93.40% of merchants are net-long with the ratio of merchants lengthy to brief at 14.15 to 1. The variety of merchants net-long is 3.10% increased than yesterday and 10.85% increased from final week, whereas the variety of merchants net-short is 10.84% decrease than yesterday and 42.86% 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 mixture of present sentiment and up to date modifications provides us a stronger Silver-bearish contrarian buying and selling bias.

— Written by Christopher Vecchio, CFA, Senior Strategist





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