Silver, as well as other precious metals, started 2024 with a fall. Its price fell below the level of $23 per ounce, having updated the lows since mid-December. Although by the current moment the bulls were able to organize a small rebound, local weakness remains in the white metal market. In the coming days, the silver price could once again test the 22.8 mark.
Pressure on the precious metals market was exerted by news from the United States. Last week, the minutes of the December meeting of the Federal Reserve, as well as the report on the labor market were published. Both documents indicated that there were no reasons to soften the monetary policy in the near future. If the statistics on inflation, scheduled for Thursday, will be released in a similar vein, the silver price could resume the downward movement.
Analysts at Heraeus note a weak start to January for the white metal. They draw attention to the gold/silver ratio, which has reached highs since last March. According to analysts, this indicates that the demand for gold remains steady. In turn, silver is threatened by weak demand in both the manufacturing sector and the jewelry industry.
Representatives of Heraeus estimate the decline in global silver consumption by the end of 2023 at 10%. Analysts consider India to be the only bright spot in the white metal market. However, local jewelers are very sensitive to the prices of raw materials, especially in terms of conversion from dollars to rupees. According to Heraeus, to overcome the record level of demand in 2022 (5,100 tons), the cost of silver must remain below $22 per ounce. Otherwise, consumption of the white metal in India won’t show significant growth.
From a technical point of view, silver also has no defense against a new wave of decline. On the daily chart, the RSI indicator is far from the oversold zone, not preventing sales. In case of negative US inflation figures for December, the level of 22.8 could be reached before the end of the current week.
The following trading strategy can be suggested:
Sell silver at the current price. Take profit — 22.8. Stop loss — 23.5.
Traders can also use a Trailing stop instead of a fixed Stop loss at their discretion.