Is the bullish outlook for industrial demand still valid?
The price movements of silver over the past few months have largely been due to its status as a precious metal. The ongoing weakening of the industrial economy is putting a strain on demand. Metals Focus’s guidance of $ 27.30 seems a long way off.
Industrial demand for silver
While silver’s status as a precious metal currently outweighs its industrial position, the latter is still an influential factor in its price movements. The Silver Institute predicted that metal demand will increase 8% year over year after declining 5% last year.
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In addition, Metals Focus was very optimistic about the raw material. Earlier this year, she predicted that the silver price averaged $ 27.30 this year and could climb even further to $ 32.
Due to the observed decline in industrial activity, the forecast values appear far away, but not impossible. On Friday, US manufacturing preliminary PMI data was lower than expected at 59.2.
Additionally, Citigroup Inc. and Bank of America warn that the Chinese economy is likely to see another slowdown as it seeks to reduce its reliance on the real estate sector. This, coupled with the ongoing energy crisis and the coronavirus pandemic, will have a significant impact on the Middle Kingdom. With the country the largest consumer of silver and other industrial metals, investors are excited to see how industrial demand will develop in the final quarter of the year.
Technical outlook for the silver price
Silver has held steady above the critical resistance reversal support level of 24 after the bulls successfully pushed it out of the zone about a week ago. Remarkably, this zone has been evasive since early September.
It hit a 6-week high of 24.83 on Friday before falling back below the resistance level of 24.50. At the time of writing, the precious metal is up 0.3% to 24.39.
On a 4-hour chart, the price of silver is trading above the 25- and 50-day exponential moving averages. Also, the formation of the bullish cup-and-handle pattern suggests further gains.
In the short term, I expect the precious metal to continue to encounter resistance at 24.50. Additional bullish momentum will be placed by the resistance level at the September high of 24.86. While the psychological level of 25 appears attainable in the final quarter of the year, it is likely to dodge in the short term as silver’s position as a precious metal outweighs its industrial status. On the downside, a move below 24 could place the support level along the 50-day EMA at 23.81.
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