Silver price may change direction

The price of silver strongly reacts to the events related to the U.S. government debt.

There is just a little bit more than a week before the U.S. government borrowing limit is reached, but there is still no compromise in Congress. UBS economists have analyzed the possible consequences of the lack of agreement between Republicans and Democrats for the gold market.

If the debt ceiling increase does not happen, the S&P 500 index is likely to fall by more than 10%. The reason for this will be investors' reassessment of growth prospects and increased systemic risks in the precious metals market. On the other hand, the index could recover some of its positions if the U.S. House of Representatives reaches an agreement on this subject. 

Experts predict that holders of Treasury bonds with a longer maturity will begin to sell them in response to a possible default in the country. This will be followed by an increase in their purchases due to reassessment of the recession risk in the U.S. economy by market participants. 

The default and the subsequent Fed decision are likely to lead to a weakening of the U.S. dollar.

Silver and other metals have recently been subject to large sell-offs.

According to Saxo Bank, over the past week hedge funds have reduced their long positions in metals and crude oil markets. There were 24 thousands of sold contracts, bringing the total bullish position in commodities down to a low of 698,000 contracts in 3 years.

Long positions in crude oil, gold, silver, and copper were actively closing.

Almost half of the silver contracts were closed, the net long position decreased to 13.4 thousand.

In terms of wave analysis on the H1 timeframe, the silver price is in the final stage of descending waves. In terms of wave analysis on the H1 timeframe, the silver price is in the final stage of descending waves. A pullback from support at 23,300 could create a new group of upward waves.

Signal:

The short-term prospects for silver are to buy near the 23.30 level. 

The target is at the level of 24.20.

Part of the profit should be fixed near the level of 23.75.

Stop loss is at 22.95 level.

Bullish trend has a short-term character, so the volume of trade should not exceed 2% of your balance.