Silver price is down by more than 1% today as the market reacts to the rising number of Covid-19 cases and the overall stronger dollar. The metal is trading at $24.80, which is slightly below yesterday’s high of $25.30.
The number of Covid-19 cases is surging around the world. Data compiled by Google shows that the number of cases has surged to more than 41 million while the number of deaths has risen to more than 1.1 million. Just yesterday, Germany confirmed a record number of more than 7,000 cases, bringing the total number to more than 398k.
These numbers have several effects to the price of silver. First, as they rise, they push the US dollar higher as investors rush to its safety. Today, the dollar index is up by more than 0.25%, erasing some of the losses made yesterday. And, as I have written before, the dollar and silver have an inverse relationship.
Second, as the number of cases rise, it increases the likelihood of a double recession in European and American companies. As a result, this lowers the demand for silver-made products.
Also, silver is falling today as investors react to the fading hopes that the US will reach a coronavirus funding deal before the election.
On a positive note, the rising number of cases has the ability to cut production as miners remain cautious about the disease. This is a positive thing for the price of silver.
Separately, another positive factor is that the rising number of cases in the United States is increasing the possibility that Joe Biden will win the presidency. With Biden in office, the US will likely increase its spending on clean energy, which is a positive thing for silver prices because of the amount of silver used in the manufacture of solar panels. In a statement, an analyst told CNBC that:
“Despite the fall in Asia, gold/silver looks to be a buy on dips, especially as financial markets start to price in substantial risk potential over the coming two weeks.”
The Dow Jones futures trade slightly lower in ahead of the opening of the last trading day of the quarter. The sentiment is mixed today as the number of new coronavirus cases continues to rise in some states in the USA. On the other hand, positive news from China supports the fast recovery scenario. The China manufacturing purchasing managers’ index (PMI) rose to 50.9, up from 50.6 in May, and better than economists expectations of 50.4. The non-manufacturing PMI rose to 54.4, better than expectations of 53.6.
Investors will monitor Federal Reserve chair Jerome Powell and Treasury Secretary Steven Mnuchin’s testimony before the House Financial Services Committee.
Silver price technical outlook
On the daily chart, we see that silver price is attempting to pick up the pieces after it dropped to a low of $21.62 in September. Now, the price has formed a bearish flag pattern that is shown in green. It is also between the first and second resistance levels of the pitchfork.
Therefore, for today, because there’s no major economic data, I suspect that the price will remain on the current channel. However, in the near term, based on the pitchfork formation and the bearish flag pattern, I expect the price to break-out lower to the support of $21.62. On the flip side, a move above $25.56 will invalidate this arrangement.
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Silver technical analysis
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