Silver price (XAGUSD) is in trouble. Its price has been in a sharp descent in the past few days and is now trading at the lowest level since July 22. As of this writing, the metal is trading at $22 and has been in the red for the past six consecutive days. It has fallen by more than 20% in the past five days.
Other metals are also in the red, with gold, copper, and palladium falling by more than 1%.
There are three main reasons why silver price is falling. First, the dollar has been relatively strong in recent days. Indeed, the dollar index has been rising for the past five consecutive days and is in its highest level since July. A stronger dollar tends to be overall negative not only for silver but for other assets as well. That is because these assets are usually traded in dollars.
Second, silver price is falling because of the rising number of COVID-19 cases in several countries. Just yesterday, the UK confirmed more than 6,000 new cases, the highest figure in months. And the Chief Medical Officer (CMO) predicts that the number could rise to more than 50,000 in October. The cases have risen in other countries like Italy and Spain. The implication is that this increase will lead to lower demand for the metal. That is because, unlike gold, silver is usually an industrial metal.
Third, the price of silver is falling because of psychological reasons. That is because in recent months, the price has soared to multi-year highs. This increase was partly because of retail traders who used it a proxy for the more expensive gold price. Therefore, once the price starts falling, it tends to lead to more selling pressure from this group of traders.
Silver price technical analysis
The daily chart below shows that silver price was in a strong upward trend in the past few months. It reached a multi-year high of $29.76 in August. And since then, the price has struggled for direction and last week, it dropped below a key support. The price remains below the 50-day and 25-day moving averages. It is also below the 38.2% Fibonacci retracement level.
Therefore, the price is likely to continue falling as bears aim for the second support of the standard pivot points at $20. On the flip side, a move above the first support at $24 will invalidate this trend.