Silver made a strong rebound from a 4-month low, but then the rise stopped. Now the prices are consolidating in the range of 21.5-22, waiting for new reasons to grow or decline. There is a 'flag' pattern on the silver chart, which implies that, after a period of quiescence, the price will continue moving in accordance with the initial impulse. In the current situation, this means that silver prices will soon resume their rise.
Apart from the chart, fundamental factors also work in silver's favor. According to ANZ Bank forecasts, the silver price might increase. The current price dynamics contradict the silver market fundamentals. In conditions of high inflation, silver usually outperforms gold. This suggests that silver may yet rise. A situation in which central banks stop raising rates while inflation still persists would be particularly good for silver.
Regarding the supply/demand ratio, the silver market is expected to be short of supply this year, which could also benefit the metal's price. Peru, the world's third largest silver producer, mined 205,489 kg of silver in January, which is 19.9% less than in January 2022. Moreover, the three largest producers of silver in Peru have shown even worse dynamics, with their production volumes decreasing by 30.9%, 44.5% and 26% respectively.
The 50% Fibonacci level (22.25) will be the next growth target for silver prices. On Wednesday, 'bulls' tried to raise the price to these tops, but a sudden increase in sellers activity led to silver losing almost all growth earned that day. Now there is a chance to prepare for a new upward impulse. The RSI indicator is gradually rising, but it's still far from the overbought zone, and now it doesn't hinder further growth of silver.
Consider the following trading strategy option:
Buy silver in the 21.7-21.9 range. Take profit – 22,25. Stop loss – 21,5.
Traders may also use a 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.