After five weeks of silver's lock-step, directional move with gold, longs in the white metal are resigning to the probability that without a significant dollar retreat, the $26 resistance will remain their point of frustration—just like gold bulls butting heads with low $1,700 pricing.
All charts courtesy of SK Dixit Charting
While surging bond yields have traumatized risk assets for weeks, the pain has been subdued since the start of this week, with the benchmark US 10-year Treasury note struggling to progress beyond last week’s 13-month high of 1.75%.
The Dollar Index has picked up the slack instead, staying close to the key 92 level and putting fresh pressure on the two choice precious metals of longs.
In Tuesday’s pre-New York session, spot silver was at $25.645 an ounce by 2:00 AM ET (6:00 GMT), down 0.4% from Monday’s official US settlement.
Chartist Anil Panchal wrote in a post on FX Street:
“Unless crossing a confluence of 50-day SMA (Simple Moving Average) and a short-term resistance line near $26.40, silver buyers shouldn’t return to the desk.”
Typically wedded to gold and regarded as little more than the yellow metal’s “poor cousin”, silver breaks out occasionally on its own. Such instances are inspired either by a sudden acknowledgement of its depressed industrial value or the animal spirits of traders trying to buck the trend. But those moments are rare, more so in the present environment where yields and the dollar are commanding the universe of markets, including stocks.
Over the previous five weeks between Feb. 5 and Mar. 12, spot silver lost 4.0% while spot gold lost 4.8%.
Vladimir Zernov, another silver tracker, wrote in a separate blog on FX Empire:
“Silver is still stuck in the range between the support at $25.85 and the resistance at $26.25. Both support and resistance levels have been actively tested this week, but silver failed to develop any momentum.”
He noted that the dollar, meanwhile, was gaining ground against the basket of currencies it was pegged to.
“In case the US Dollar Index manages to settle above the resistance at 92.25, it will head towards the next resistance level at 92.50 which will be bearish for silver and gold.”
Zernov observed that the gold/silver ratio—a measure of how much silver one gets for the price of an ounce of gold—could bring more pressure onto the yellow metal after its cross into the 67-range that it stayed below last week. He added:
“Silver will have a chance to gain material momentum once it manages to get out of the current range, but it remains to be seen whether silver traders are ready for serious moves ahead of the weekend.”
Sunil Kumar Dixit of SK Dixit Charting in Kolkata, India said unless spot silver sustains above previous week high of $26.63, the metal is headed for a next lower leg in the 50-week EMA (Exponential Moving Average) of $23.60.
Dixit wrote:
“Silver has broken previous week low of 25.74, made low of 25.40 and continues to sustain below previous week low.”
“Prices are sustaining below 10-week EMA of $26.07 & 20-Week SMA which happens to be middle Bollinger Band of $25.67. These factors make silver bearish on weekly charts. The daily chart shows silver trapped in a tight range, between the 50-Day EMA of $26.22 and 200-Day SMA of $25.61.”
But he said there was a chance of spot silver staging a recovery if markets acknowledged its “oversold Stochastic reading at 22.”
“That can trigger some limited upside pull back to $25.93 and $26.22,” he added.
Technicals: Spot Silver Remains A 'Strong Sell'
On my end, Investing.com’s Daily Technical Outlook maintains a “Strong Sell” on spot silver.
My reading shows that should the market extend its bearish trend, a three-tier Fibonacci support is likely to emerge, first at $25.487, then $25.291 and later at $24.972.
In the event of a rebound, then a three-stage Fibonacci support is expected to form, first at $26.125, then $26.321 and later at $26.64.
In any case, the pivot point between support and resistance is $25.806.
As with all technical projections, we urge you to follow the calls but temper them with fundamentals—and moderation—whenever possible.
Disclaimer: Barani Krishnan uses a range of views outside his own to bring diversity to his analysis of any market. For neutrality, he sometimes presents contrarian views and market variables. He does not hold a position in the commodities and securities he writes about.