Silver price remains under pressure this Tuesday as the slew of high-impact data released on the day continue to be in the red. ZEW economic sentiment in the EU was far worse than expected, and the US retail sales saw a slump to -0.5% whereas, in the previous month, it had shown a healthy 0.6% gain.
It is obvious. The coronavirus-induced disruptions to the supply chain have kicked in and are starting to show. Factory production activity in China has slowed to 30-year lows, and the demand for industrial metals such as silver and copper are down in the dumps.
A look back at the price situation during the 2008 global financial crisis saw silver price action peak at $19 and retreat below $9 an ounce before the QE programs kicked in. A similar situation is playing out presently, and what is to say that history may not repeat itself?
Silver price action on the XAGUSD continues to test the $12 psychological support price area. Price touched it off yesterday on the way to 11.80, but silver price daily candle bounced off that area. Today’s candle has resumed a bearish push towards that support.
The primary fundamental influence for silver prices is industrial demand for the metal, which takes up 60% usage for silver. But with the airline industry being struck hard by the coronavirus outbreak, demand for silver could remain low for a long time to come. This may send silver into a long term downtrend, which allows it the opportunity to test further lows at 10.56 and 9.09. These price levels are where silver prices had found multi-year support in October 2006 and November 2008, respectively. The highs of March and December 2004, as well as the high of October 2005 at 7.96, may become relevant if indeed, silver prices can breakdown the previous two support areas. These are long-term plays, and a lot can happen in between these price levels in the medium-term and short-term.
On the flip side, 11.80 remains the support target of interest at the moment. If it keeps on resisting downside moves, silver may enjoy some reprieve in the form of price recovery that targets 13.96 (December 2015 and November 2018 lows). If price can stay above the $14 mark, this will keep silver prices within the range it has enjoyed since 2013, with the price cap being found at the $21 mark.