Silver, just like the main precious metal, which is gold, has been in an uptrend for the past two months. However, due to its high volatility, the dynamics of silver are more powerful. Prices have risen by 35% since the October’s lows. Will quotations continue to rise at such a rate, or will the first serious correction since October be seen?
The main reason for the growth of silver, as well as gold, is the dollar’s fall due to expectations that the Fed would halt its monetary tightening cycle. The latest U.S. inflation data, released on Friday, only increased these expectations. Probably, the rate hike cycle will be ceased for a while over the next few months. However, it is over-optimistic of markets to think about a possible rate cut.
Silver also has a second potential growth driver, which is the lifting of COVID restrictions in China. The country is the largest consumer of silver. Thus, the acceleration of economic growth in this country will clearly benefit the prices of almost all metals.
Many analysts’ forecasts for silver in 2023 are generally optimistic. Despite the fact that silver does not have such a pronounced safe haven asset status as gold, it can be used as a means of diversifying investment portfolios as well. For instance, German Commerzbank forecasts silver prices to rise to $25 per ounce in 2023.
The signal for a possible breakdown of the silver uptrend would be fixation of quotes below the range of 23.3-23.5. Due to high volatility, it is better to look at price fixation by the results of the whole trading session, as separate speculations can easily take the quotations lower to the area of 23 and then bring them back to the trend line.
If the price stays within the rising trend, it will be possible to open positions with the expectation of growth to the previous local highs above 24.
The following trade strategies may be suggested:
Buy silver after the closing of the trading session with a price not lower than 23.5. Take profit - 24. Stop loss - 23.3.
Also, traders, at their discretion, can use the Trailing stop instead of the fixed Stop loss.