The correction in silver is still ongoing after the July growth wave. The price has dropped below the $24 per ounce level and is now heading towards the $23 mark. At the same time, technical indicators still point to the incompleteness of the downward movement. The area near the level of $23, where bulls are sure to increase their activity, will be suitable for taking long positions in silver.
ADP statistics on the U.S. labor market had a negative impact on silver prices yesterday. According to this data, the number of jobs created in July reached 324,000. This significantly exceeds market participants' expectations of 189,000. Stable labor market creates an environment for the Fed to maintain its tight monetary policy. If Friday's official data from the U.S. Department of Labor confirms ADP estimates, the decline in silver prices may accelerate.
The ongoing correction in silver opens an opportunity to buy it at more favorable prices. Precious metals market analysts estimate that silver will surpass gold in terms of price gains as the cycle of central banks' interest rate cuts begins. The reason behind this is that silver is actively utilized for solar panels production. This industry already accounts for 14% of all silver demand, and consumption continues to increase rapidly.
Metals Focus analysts believe that silver will remain a single option for the production of solar panels as long as prices remain below $30 per ounce. If this level is surpassed, manufacturing companies will actively seek a substitute for silver. A similar situation has already happened to palladium, which saw a sharp rise in price and forced automakers to switch to cheaper platinum. Silver is not in danger of facing such a scenario. A rise in prices to the range of 24-25 will not cause a significant drop in demand.
The RSI indicator is gradually declining, but the oversold zone is still distant. Therefore, traders should wait for the correction to continue in order to buy silver. A price drop to the level of 23 may prove to be a good moment to open long positions.
Consider the following trading strategy:
Buy silver in the 23-23.3 range. Take profit – 24. Stop loss – 22.7.
Traders may also use a Trailing stop instead of a fixed Stop loss at their discretion