Silver prices, as represented on the XAGUSD pairing, has registered intraday gains after the Fed’s expansion of the asset purchase program weakened the US Dollar broadly. However, it remains to be seen how this will impact the overall medium-term and long-term trend for silver prices, which have a significant industrial component in terms of market fundamentals.
There are reports of some factories being opened in China as the country reports a breakthrough in the containment of the coronavirus transmission. However, silver prices will only have a chance at full recovery with a pickup in factory activity and restoration of the supply chains. The intended bailout which is still being debated in the US Congress may only help airlines with operational costs, but may not be enough for them to resume their regular orders from parts manufacturers.
Last week’s massive dollar strength depressed commodity prices across the board. This being said, I expect any recovery in silver prices to be transient and also dependent on the short-term situation with the US Dollar.
Therefore, if the USD keeps weakening throughout the week, we may expect silver prices to target the next resistance levels at 13.96, with possible extension to the lows of March and July 2019 at 14.977.
If traders seek for potential sell points from the bounce, then we could see silver prices targeting the current support at 11.812, with the possibility of a further extension to the September 2006 lows at 10.56.