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The silver price closed last week and hit an important level of support. So could XAGUSD be on the cusp of a major shakeout?
Despite inflation expectations hitting a 13-year high last week, precious metals have not been able to gain momentum. Silver was down, finishing the five-day performance down 1.60%.
While hardly a breakdown, price has pulled back in support of a trendline that has been in place for a year.
If precious metals are an effective protection against inflation, the NY Consumer Survey and UMich data from Friday should see silver prices skyrocket.
The data showing that one-year inflation expectations are the highest in over a decade had the opposite effect.
The subsequent sell-off brought the price of silver dangerously close to collapsing. Next week, XAGUSD’s performance is key to determining whether the price will realize the bull’s dream of silver above $ 30 anytime soon.
XAGUSD technical analysis
The weekly chart highlights a strong uptrend from July 2020 that supported the price. The trend, which can be seen at $ 25.60, has been tested in 3 of the last 4 weeks. Although the price recovered by the end of the week in the previous attempts and averted immediate danger. However, last week the price ended the session at a week-low. In addition, a small decline next week would force XAGUSD below the threshold.
In this case, a logical goal becomes $ 21.60. The 100-day moving average at $ 21.62, the September 2020 low of $ 21.66, and the November low of $ 21.89 all add to this “must-hold support level.”
I see this as a low probability event. However, the technical data suggests that there is at least some chance should the market succumb to a much wider phase of liquidation.
A positive close next week will ease the immediate pressures. However, until XAGUSD breaks the robust resistance band between $ 28.50 and $ 30.00, its evidence of inflation protection will remain in question.
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Weekly chart of the silver price
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