Silver, moving in line with almost all other metals, continues to fall in price, taking a negative view of the U.S. economy statistics for January. After silver failed to stay above 22, there was a risk of a decline to the next level of correction in the Fibonacci (50%, 21.1). However, even now the oversold condition can lead to a rebound of silver prices upwards.
Despite the current wave of correction, medium-term expectations for silver prices continue to remain positive. Thus, Peter Kraut from Silver Stock Investor, expects that the price of silver could rise to 25 dollars per ounce in the first half of 2023. In the second half of the year, he forecasts a continuation of growth to many year highs at $30.
Forecasts of growth in demand for silver come not only from market analysts, but also directly from the producers of precious metals. Hecla Mining, the largest producer of silver in the U.S., reported rather disappointing results for the previous year, one of the reasons was the fall in the price of the metal. However, the company said it has good opportunities for higher prices in the future, as the economy switch to renewable energy sources increases the need for silver.
From the supply side, silver prices can be supported by Chinese producers, who reduced their silver production by 10.8% in January compared to December, down to 1261.5 tons. Reduced production is mainly due to the period of long holidays and technological maintenance of mining enterprises in China.
On the silver chart, the RSI indicator fell into oversold zone for the first time since last September. Taking this into account, the bulls can bounce the price up, without waiting for its fall to the support at 21.1. The main target is to get back above the 22 level. Then it is possible to expect a rise to the former range of 23-24, but this is a more distant prospect.
The following trading strategy option can be suggested:
Buy silver in the 21.6-21.7 range. Take profit – 22. Stop loss – 21.4.
Also, traders may use Trailing stop instead of a fixed Stop loss at their convenience.
This content is for informational purposes only and is not intended to be investing advice.
