Silver started the week with a sharp drop, breaking through the lower boundary of the flat at 23.2. Local minimum has been set at 22.75, but the price failed to hold there for a long time, and, as a result, a major part of the impulse fall has been redeemed. Since the breakdown of the lower limit of the 23.2-24.2 range turned out to be deceptive, now there can be an attempt to test the upper limit.
This year's outlook for silver continues to point to a good upside potential. The CEO of ABC Bullion, Janie Simpson, noted that silver prices tend to rise by 20% during periods of high inflation. In this regard, the precious metal could hit the round level of $30 per ounce in 2023.
Many analysts believe that the precious metal's weak stocks are likely to be the cause for silver's price growth. Data from the U.S. Silver Institute suggests that global silver production in 2022 stood at 843 million ounces. By comparison, there were about 900 million ounces mined in 2016. Thus, the trend is indicative of silver's supply reduction.
As silver is often a by-product of other metals, it is very difficult to boost its production in a short period of time. Increased demand from industries, particularly in the energy, electronics and automotive sectors, could also push prices higher.
High volatility of silver means that there is still a probability of the upper or lower limit breakout at 23.2-24.2. Therefore, it might be prudent to place a Buy order near the lower limit of 23.2 with a view to moving up above 24. Some traders tend to push the Stop loss lower since impulse falls, as seen on Monday, might trigger an automatic position closing, while quotes can move back to the previous, i.e. higher, levels within a few moments.
The following trading strategy can be suggested:
Buy silver when it moves down to 23.2. Take profit - 24. Stop loss - 23.
Traders may also use Trailing stop instead of a fixed Stop loss at their discretion.
This content is for informational purposes only and is not intended to be investing advice.
