Setback in the last two weeks of the price of silver, which returned below $ 24, failing to give continuity to the rise from the annual lows touched on September 12th. The 12-month balance of the white metal thus returned to negative by approximately 1.6% with the highs of 2021 (over $ 28) which are approximately 15 percentage points away.
Silver as well as gold gave little signs of post-Fed vitality. US Treasury yields declined after Wednesday Federal Reserve announced a broadly anticipated tapering of its monthly bond purchases ($ 15bn a month cut starting in November) and indicated that it will be patient in raising interest rates. Also there Bank of England did not move on rates, while most analysts expected an initial monetary tightening.
L’still accommodating attitude of the banks central and the resulting decline in yields usually represents an assist for precious metals as lower interest rates tend to increase the appeal of holding gold or silver.
The disappearance of the thesis of the transience of inflation.
What moves the price of silver?
Silver is considered by many economists to be a real indicator for predicting the global economic health that determines the demand for the industry.
We must take into account the historical positive correlation between gold and silver. In fact, the gold / silver ratio, which expresses the quantity of ounces of silver needed to buy an ounce of gold, is very popular with investors. A high ratio means that silver may be preferred by investors over gold, conversely a low ratio tends to make gold more attractive to investors than silver.
To analyze silver we must start fromsupply and demand analysis, with the difference between these influencing the price of this precious metal.
The main producers of this raw material are: China, Mexico and Peru; while the importing countries that consume the most silver are: the United States, the United Kingdom and India.
Silver is widely used in jewelery, in electronics, in the medical sector and thanks to its electrical conductivity it is very present in highly sought-after products such as photovoltaic panels and electric cars.
It is easy to observe that, in periods of strong economic growth, the price of silver tends to rise thanks to the increase in the consumption of electronic products, jewelery and vehicles. Likewise, silver prices tend to rise even during periods of recession; this is due to the fact that, like gold, silver is considered a safe haven asset.
It is important to remember the positive correlation between inflation and gold: if the inflationary process, now underway, continues, then the bull rush of gold (and therefore of silver) could act as a spur to the prices of these precious metals.
Finally we remember that silver is quoted in dollarsConsequently, when the dollar is weak, purchases from countries other than the United States become more attractive with a favorable exchange rate and this tends to increase demand. Conversely, a very strong dollar will hold back purchases.
Technical analysis on silver
After breaking up the important long-term level at $ 21.5 in July 2020, silver then entered a lateral phase of distribution or congestionone between $ 21.5 and $ 30.
The technical situation of silver is improving after the Bullish break, on October 19th of this year, of the bearish trend line built on the highs of May and August of 2021. This breakout can now be confirmed by a pullback on the aforementioned trend line and a subsequent upward restart with the first target in the area of $ 24.8. Exceeding this level could push the precious metal towards $ 25.8 and $ 27, thus returning above the 200-period moving average.
On the downside, however, the breakout of the $ 23 area could generate weakness with a target of $ 21.5. Only a return below that level could give a strong negative signal in terms of market sentiment on silver.
Supports and resistors
Support 1: $ 22.97
Support 2: $ 21.49
Resistance 1: $ 24.85
Resistance 2: $ 25.79