Silver prices need a pullback after a powerful wave of growth

18 March 2024 70
Silver prices need a pullback after a powerful wave of growth

Last week, silver prices continued their rapid growth, adding another 3.6%. Since the beginning of March, the white metal has risen in price by 11%. For the first time in 3 months, the price has climbed above the mark of $25 per ounce. Nevertheless, on Friday, half of the daily gain was lost, indicating the desire of buyers to take profits. The correction in silver prices to the level of $24.5 will help to cool the bullish enthusiasm.


The beginning of the white metal prices pullback could be provoked by the news from India. Local banks stopped silver imports because of competition from private traders. They buy silver in the UAE on favorable terms due to lower duty. Cheap imports allow small market players to dump by selling silver in the Indian domestic market more than 15% cheaper compared to global prices. Banks are unable to offer discounts, so they record a drop in demand and suspend imports of the metal.


Revised estimates of the metal's output are also contributing to the decline in silver prices. Previously, The Silver Institute expected production growth of 3% in 2024, but GlobalData analysts raised that forecast to 4.1%. Mexico, the world's largest silver producer, will fully offset last year's 3.2% decline with a future production increase of 5.9%.


Among the top producers of the white metal, the US and Russia are expected to see significant increases in supply. GlobalData forecasts that US silver production will jump by more than 16%. The reason will be the Rochester mine, where expansion work was completed in November. Russia may increase silver production by 8.6%. This will be facilitated by the launch of the Prognoz mine in the Far East, with shipments expected to start in Q3.


On the daily silver chart, the RSI indicator is showing the strongest overbought condition since the beginning of December. From the technical point of view, the nearest correction target for the white metal prices is at 24.5.


Consider the following trading strategy:

Selling silver at the current price. Take profit - 24.5. Stop loss - 25.5.

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

This content is for informational purposes only and is not intended to be investing advice.

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