Another reversal of silver prices from the upper boundary of the flat is expected

Silver prices, as expected, once again traveled from the lower to the upper boundary of the medium-term flat. The increased demand of the market participants is becoming more prominent as the prices are falling below 22.5 and traders are fixing long positions above the level of 23. At the end of last week there was a sharp momentum, which today is followed by a corrective pullback. It’s likely that the white metal’s price will once again make its way to the level of 22.5.

The prolonged consolidation of the precious metals market has a negative impact on investor sentiment. For instance, last week Commerzbank lowered its target prices for gold and silver for 2024. As reported by the head of the analytical department Tu-Lan Nguyen, the price target for silver was reduced from $30 to $28 per troy ounce. The worsening of the forecast is primarily due to the weakening of hopes for a large-scale reduction in interest rates of the U.S. Federal Reserve (the Fed).

At the end of December, the German bank was betting on a significant Fed rate cut. As inflation weakened and economic activity declined, the cost of borrowing was expected to fall by 2% to 3.5% over the next two years. However, Commerzbank economists have now revised their expectations and forecast the level of the federal funds rate at 4.25% by the end of 2025.

Additional pressure on the silver price may be exerted by the growth of metal supply. According to Polymetal, Russia's new silver mine Prognoz will start selling silver in the third quarter of 2024. Thanks to the commissioning of this project, global production of the white metal this year could rise by 4% to 843 million troy ounces. This will alleviate fears of a growing shortage of silver in the global market.

The range of 23–23.4 provides an interesting opportunity for short-term silver selling. The target is the zone between 22.1 and 22.5, where a pullback may start and the profit could be fixed. The strategy remains valid until a breakout of one of the flat boundaries is recorded.

The following trading strategy can be suggested:

Sell silver above the level of 23. Take profit — 22.5. Stop loss — 23.4.

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