Upside In Silver Prices May Remain Capped Short-term

Analysts at Bank of America forecast that silver prices may continue to struggle on the back of coronavirus-induced weak industrial demand in the short-term. However, long-term prospects may improve when industries recover at a pace that outstrips that of the coronavirus impact. For that reason, the bank has set a $23 price benchmark for 2021, which is an increased forward projection for the white metal. 

This analysis re-echoes the market consensus for silver prices as well as other commodities closely linked to manufacturing such as copper. Various manufacturing PMI data were released in the last two weeks; all were painting a mixed picture. While countries like China had started to see some improvements in its PMI, others like emerging market economy South Africa continue to worsen. Such a mixed picture constitutes headwinds to silver prices, which continue to struggle to cross the $18 price level. Incidentally, recent data suggests that China may be seeing a second wave of coronavirus infections, which could further delay a pickup in industrial activity. 

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Short-Term Outlook for Silver Prices

Silver price action on the XAGUSD pair shows that the 200-SMA dynamic support held well on the daily chart, with the price candle of yesterday bouncing off it and therefore staying above the 38.2% Fibonacci level (16.992105) from the swing low of 21 April to the swing high of 1 June 2020. This scenario created a false break of the evolving symmetrical triangle. However, price rejection at the lower triangle border could lead silver prices on a march to the south, which then confirms the breakdown of the triangle. This price move could target 16.99205 once more, with an opportunity to aim for 16.56950 and 16.14694 (61.8% Fibonacci retracement) if bearish pressure predominates. 

On the flip side, a price move to the upper triangle border must follow a break of the 17.50813 price area, with a further breach of 17.76315 if the movement is to find success. A break of the triangle’s upper border then targets the 18.14191 price level, with 18.64935 (25 February 2020 high) constituting the next resistance to bullish momentum.

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