The silver price has undergone the most significant daily price drop in several years, as prices shed nearly $3.50 on the day as at the time of writing to trade just under $12 an ounce. The selloff in the commodity markets resume just as the lack of industrial demand has started to pose significant headwinds for several commodities due to the ongoing coronavirus outbreak.
The coronavirus pandemic continues to spread around the world, and one effect has been the drop in factory activity in many countries. Sweeping travel restrictions and lockdowns are now being implemented by governments all over the world, even as some central banks (notably the Fed and Bank of Canada) implemented their 2nd emergency rate cuts in the space of 10 days.
The silver price chart (XAGUSD) is an indication of the crazy times we live in, as candles blow through support and resistance areas towards multi-year lows. For silver price activity, price is barely hanging on to the $12 per ounce mark, having touched off the 11.8030 price level. However, it has managed to bounce off the 11.80 price level; a low that was last seen sometime in April 2009.
If the bounce is sustained, then a retest of 13.83227 is expected to occur. Further resistance targets to watch include the 13 Aug 2018 and 13 May 2019 lows at 14.37184, as well as 15.00492.
On the flip side, we would expect further bearish sentiment to bring about a retest of the 11.80302 price area. A break of this price level opens the door towards additional support at 8.8103, which is the price at which the lows seen during the 2008 global financial crisis are found.
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Gold prices are diving as the US trading session gets underway. The move lower in gold prices is fueled by a stronger US Dollar and US stock markets being near their all-time highs, lowering the demand for gold. However, the mood may change in the next few hours as the US ISM Non-Manufacturing Index is due.
Technically, gold prices are trading sideways between the October 11 low of $1473.68, and the October 25 high at $1518.41. The benefit of this well-defined rectangle pattern is that when the price finally starts trending the price should hopefully not look back and reach its target. The pattern also provides price targets.
If gold prices were to trade above the October 25 high of $1518.41, then the price might be able to reach the $1563.14 level, as the difference between the upper and lower limit of the pattern is added to the October 25 high. On a break to the October 11 low at $1473.68, the price might be able to reach the $1428.95, as the difference in the range is subtracted from the October 11 low.
Time will tell if bullish or bearish traders will command price as the chart pattern itself is neutral in its outlook.