Silver price is bouncing back today after diving by more than 13% yesterday. The metal is trading at $25.75, which is significantly higher than the intraday low of $23.45. Other metals have also rebounded, with palladium price rising by 0.60% and gold price rising by more than 0.20%.
Why silver price plunged yesterday
The price of silver and other precious metals plunged yesterday as investors reacted to news that Russia had unveiled the first coronavirus vaccine. A vaccine would have mixed results for silver prices. First, as an industrial metal, it would mean that demand for the metal will increase as the economy reopens.
Also, it would lead to higher supply, which would offset demand. Second, it would lead to tightening by central banks. As we have written before, the recent rally has been fuelled by low interest rates and open-ended quantitative easing policies by the global central banks.
Recent data from the US has shown that the economy is rebounding. For example, data from the Bureau of Labour Statistics (BLS) showed that producer price index rebounded in July. Another data released on Tuesday showed that job openings in the US rose to 5.8 million on the final day of July. And last week, data from the Office of National Statistics (ONS) showed that the economy created more than 1.8 million jobs.
Today, silver price is rising because analysts and experts are raising serious concerns about the Russian coronavirus vaccine. In a statement yesterday, Anthony Fauci and other American physicians warned that it was too early to bet on the vaccine because a lot of test has not been done. The same sentiment was repeated by German health minister.
Silver price outlook
The daily chart below shows that silver price has been on an upward trend since bottoming at $11 in March. It reached a high of $29.80 on Friday this week as investors remained hopeful about low interest rates.
Yesterday, the XAGUSD pair dropped to a low of $23.41, which is slightly above the 38.6% Fibonacci retracement level. The price remains above the 50-day and 100-day exponential moving averages. It also seems like the price has topped, as evidenced by the pink rectangle.
Therefore, while the overall trend remains bullish, there is a possibility that the price will struggle to move above last week’s high of $29.80.