Short-term upside potential for silver prices almost exhausted

By the end of November silver prices added more than 11% for the month. On Monday morning trading the prices of the white metal again updated the semi-annual maximums, slightly short of the $26 per ounce mark. As the quotes rise, traders are increasingly willing to fix the profit, and now one can already see the beginning of the correction. The pullback could be fleeting, but its depth still may catch the "bulls" by surprise.

According to a new report from The Silver Institute, an organization that studies the white metal market, this year global demand for silver will drop by 10% to 1.14 billion troy ounces. This is due to a decline in investor interest in silver (-21%), as well as lower consumption of the metal in jewelry (-22%) and tableware (-47%) compared to 2022. At that time, global demand for the white metal increased by 17% and reached a record of 1.27 billion ounces.

At the same time, experts took into account the growth of silver consumption in the industry this year by 8% to 632 million ounces. Nevertheless, according to Silver Institute forecasts, this is not enough to compensate for the fall in consumption in other sectors. In addition, the possibility of a recession in 2024 should still not be discounted. Half of the demand for silver is provided by the manufacturing sector, so the economic downturn may seriously affect the prices of the metal.

Analysts at TD Securities take an optimistic view of silver's prospects for the next year. Nevertheless, they don’t expect the price to rise above the level of $26 per ounce in the first half of 2024. Thus, the potential for further silver price increases from the current level is almost exhausted.

The vast majority of technical indicators show that silver is overbought. As the first correction target we can consider the level of $24.8, where the local highs of August are located.

The following trading strategy can be suggested:

Sell silver at the current price. Take profit — 24.8. Stop loss — 25.9.

Traders can also use a Trailing stop instead of a fixed Stop loss at their discretion.