The price of silver could drop to $ 19 in a rush if this happens
If silver ends below $ 22.32 for the week, it could signal the end of the bull market in 2021 and a return to the teenage area. Spot Silver (XAGUSD) rebounded from a 14-month low of $ 22.50 to close in the green last week and well above the 100-week moving average for the third straight week. However, the price is facing strong headwinds that could force a weekly close below the 100 WMA for the first time since May 2020. When this happens, the next level of technical support will be at $ 19.10.
Precious metals were under the hood for most of 2021. Despite rampant inflation, traditional inflation hedges have developed miserably. Silver hit $ 30.08 in February, briefly beating the 2020 high of 29.87. Since then, XAGUSD has been trending downward, causing the price to drop to its lowest level since July 2020 last week.
Headwind in the price of silver
In the past few weeks, the Fed’s rather restrictive tone has significantly dampened the sentiment of precious metals. Last week, Fed Chairman Jerome Powell shocked risk assets when he appeared to change his mind about inflation from temporary to structural. As a result, bond yields are screaming up, taking the greenback with them, and putting downward pressure on gold and silver. Precious metals are unprofitable assets and have an inverse correlation to bond yields. Additionally, the US dollar typically follows higher bond yields, which increases the cost of dollar-denominated commodities like silver.
XAGUSD price forecast
The weekly price chart shows that the current silver price of $ 22.32 is just above the closing price of $ 22.34 in October 2020. I think this is important for two reasons. First, the 100-week moving average is $ 22.33, almost the same as the lowest closing price in October 2020. Therefore, if silver ends the week below $ 22.33, it will be the lowest closing price since July 2020 and below the 100 WMA.
In this case, the outlook becomes very negative. Then the price of silver could succumb to sales as long-term owners throw in the towel. Tech-wise, a close below $ 22.32 on the weekly chart targets the 200 WMA at $ 19.10, in line with 2019 multi-year highs. Just a finish above the 200 WMA avoids the risk of an impending breakdown. Hence, the end of the silver price this week could have far-reaching consequences.
Silver Price Chart (Weekly)
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