Silver prices extended their slide for the 6th consecutive day as travel bans and visa restrictions imposed to the coronavirus outbreak kick in across the world. The drop off in industrial demand as a result of disruptions in the supply chains of car manufacturers and aeroplane makers continues to hound the asset, which has seen its value drop by nearly 11.4% in what has been a bloody week for silver and other commodity assets.
Silver is an important raw material in the manufacturing process of cars and aeroplanes, making up 60% of global silver consumption. Plants of major car companies (Toyota, Volkswagen, etc.) are either shut down totally or running at low capacity. This is as a result of several coronavirus-induced factors:
suppliers not able to deliver
enforced shutdowns or quarantines
The situation has led to a drop in global demand for silver, leading silver prices to trade significantly lower than they were at the start of the year. The XAGUSD pair is currently trading at 15.39508 and is approaching a key support level already tested earlier in the week.
Silver prices as captured on the XAGUSD commodity CFD asset looks set to test the support level at 15.25534 after breaking below the range of price I identified in my analysis of the pair earlier in the week. This break has set the tone for a reversal of the trend from an uptrend to a downtrend. Therefore, the bias for silver prices remains bearish, and this may prompt a breakdown of the 15.25534 support level. This break could then target the next support at 14.97849, which is where the lows of 8 March, 11 April and 15 July 2019 are located.
On the flip side, failure to breach the 15.25534 support may allow for a price recovery bounce, which may then retest the neckline of the Jan/Feb 2019 double tops. This neckline resistance rests on the 15.57353 price level, where previous highs of 22 March and 21 June 2019 are acting in role reversal. 16.15726 is where we have the price peaks that form the Jan/Feb 2019 double top pattern, and this is the next resistance in line if silver prices can work out a recovery above 15.57353.