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Silver prices have been slammed following the latest Federal Reserve (Fed) meeting, which sent some shock waves across the commodities markets. Is this just the beginning of a trending decline for silver, or was this sudden selloff an over reaction and a potential area to get back towards 28 USD an ounce and above?
After briefly breaking past 30 USD an ounce back in February, silver prices slid but were picking up serious steam throughout much of May until the middle of June, coming up to over 28.50 USD an ounce. Concerns over the supply of silver and the projected uptick in demand helped bring in more buyers and silver seemed poised to continue holding steady.
On June 16th, the Federal Reserve concluded an update meeting that prompted a wave of selling and anxiety for commodities traders. While no major developments having been started, the Fed did hint at sooner than anticipated interest rate increases, which could come as early as 2023.
The Federal Reserve has so far continued to hold interest rates at near zero to prop up the economy amidst the pandemic, and within the United States, the outlook for a post-COVID recovery seems to be gaining real speed.
The silver market has also come under attack on the heels of a stronger US dollar. The dollar has made impressive advancements as a result of positive economic developments and a highly contagious variant of the coronavirus that has been sweeping through Europe recently.
The greenback got an extra boost following a very optimistic ADP Employment Change report, which showed that private businesses in the United States hired an additional 692,000 workers, which was higher than analyst estimations at around 600,000.
As the dollar strengthens, it has the tendency to hurt bullion prices, which is often seen as an alternative to the dollar and strengthens when there is market anxiety and volatility.
With where silver prices are currently, the selling has been reduced slightly and we are starting to see silver try to consolidate above critical support at 25.50 USD to touch past 26 USD an ounce. Could this be the right time to get a move back towards 28 USD and beyond?
The sell off that came swiftly into the market following the Federal Reserve announcements, took silver prices down about 8% from June 17th.
Since then the silver market has seen some volatility and some of the most worrying concerns were that silver could break below 25 USD and inch closer and closer to around 20 USD, where silver was trading around in July 2020.
The worst of those concerns seems to have been alleviated for the time being, as silver got a bit of a rebound off of the nearest support at 25.80 USD to get back into the low 26 USD an ounce range.
The nearest level of resistance for silver with where it is currently trading, is the 20 day EMA at 26.55 USD. If this level is successfully retested and broken through, the next area of immediate resistance silver is likely to encounter can be found at 26.75 USD, the 50 day EMA. If silver can get a break above this level, the May 26th high of 28.25 may open back up which could attract additional buyers.
In terms of support, those bullish on silver do not want to see a break below the nearest support at 25.80 USD. If this level is broken, a greater silver selloff could be held back with support at 25.60 USD, the low from April 19th. Should this level fail to hold, silver could see a drop back to the mid 24 USD dollar level at 24.55 USD, the low from April 5th.
In terms of RSI, the oscillator is showing signs of overselling, even with the slight bounce to the upside, so it is possible that silver could realize a recovery back into the 28 USD range for July, and potentially beyond should market sentiment turn course for bullion over the coming weeks.
If you are trading silver in the short term, do consider setting your stops and exit limits in place, because as we saw from June 17th, silver can be prone to big moves in either direction so you definitely should exert caution.
Do you think silver will continue falling or is this the right time to be a buyer? Let us know your thoughts and price predictions for silver in the comments to join the conversation with our analysts and community!
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