After a long decline, silver prices have shot back up recently, first retaking the $20 level. This recovery has taken place against the backdrop of increasing trade tensions between the United States and China. On Wednesday, the silver price exploded nearly 2%, sailing through the $30 level and hitting about 30.40 during European trading hours. With fears of a looming recession in the U.S. economy, this movement is catching steam. At the same time, it causes the U.S. Dollar’s value to decrease.
The current price action is attempting to confirm a break above the upper boundary of an Ascending Triangle chart pattern. Everyone is watching the August 8 low of $26.45 like a hawk. U.S. Analysts are pointing to a recent uptrend in the price of silver. Nonetheless, they caution that the general outlook is still bearish given that silver continues to trade below the key 200-day Exponential Moving Average (EMA) of about $30.70.
Technical Analysis of Silver’s Performance
After Silver’s recent rally, it is currently testing the breakdown region of its Ascending Triangle chart formation. This formation is marked by a rising wedge pattern, with the latest low set on August 8 at $26.45. The significant resistance level for silver is indicated by the horizontal line drawn from the October 22 high of $34.87.
Even with this bullish advance up to $30.40, analysts warn the larger, prevailing trend remains bearish. As it stands, silver is still under its 200-day EMA. It is one of the primary leading indicators that helps to predict long-term price trends. The EMA level at $30.70 is a further reminder that silver prices are still in the process of establishing a new bullish trend.
The 14-day Relative Strength Index (RSI) has just lifted off the floor. It recently fell below the oversold level of 30.00, indicating a possible short-term bounce. With most market participants still cautious thanks to the now long-lasting bearish momentum, excitement is muted.
Impact of Economic Factors on Silver Prices
Global trade relations, particularly between the U.S. and China, are in a state of flux. These fluctuations have greatly affected silver prices. As markets are pushed to the brink, the anxiety deepens that these crises are able to branch out, causing a larger recession in the US economy. This one-two punch of climate has depressed the U.S. Dollar, giving non-yielding assets like silver more appeal to investors.
Additionally, lower interest rates controlled by the Federal Reserve (Fed) have played a role by fueling this trend. That’s good news for precious metals, silver included, as they don’t pay interest like other financial assets. As a result, lower rates tend to pump up investment in silver, which is widely viewed as a hedge against economic turmoil.
Even with all these stars aligned for silver, it’s important to recognize that overbearing resistance levels are holding strong. The April 4th high of $32.00 is standing, however, as major resistance. Silver needs to reclaim this level to prove a more bullish trend is underway.
Future Outlook for Silver Prices
As silver prices test important technical levels and respond to external economic pressures, market analysts will closely monitor upcoming developments in U.S.-China trade negotiations. The low of $26.45 August 8 will be an important support zone for the gray metal going forward. Should prices continue to hold upward of $30, it might create a new bullish sentiment in the marketplace.
Ultimately, while acknowledging the recent momentum, it is still critical to understand that a bullish price action paradigm is being held hostage under a bearish structure. Be sure to watch the RSI and other technical indicators carefully. They will be immensely important in deciding if this new recovery picks up steam or simply ends up a short-lived jiggle within a greater long-term move lower.
Investors and traders alike need to be on their toes with such jittery market conditions. These forces, economic data releases, central bank policy decisions, and geopolitical developments, are all interrelated. These circumstances are sure to help dictate the future course of silver prices over the next several weeks.