Silver Price Prediction Overview:
Silver Prices Fall as Christmas Star Shines
Silver prices fell more than -3% on one of the last full trading days before the Christmas and New Year holidays, thanks in part to what could be profit taking ahead of the vacation. After all, the best performing asset classes – like equities and precious metals – have generally been lagging in recent days, while the worst performing ones – like the US dollar – are OK. Unlike the Christmas star, which shone yesterday, silver prices have a bleaker outlook in the near term.
Silver Price Fundamentals Remain Strong
The fact remains that “with public deficits on the rise and interest rates that remain low – much like the 2009 to 2011 window – now that the world economy is looking at a period of significant growth after the pandemic, silver prices have a recent historical precedent to suggest that they are likely to lead gold prices for the foreseeable future.In this sense, the silver/gold ratio remains at its highest level since the mid-September.
Furthermore, long-term technical studies still suggest that a bottoming process has begun, suggesting year-end profit taking will not disrupt the overall bullish narrative for silver prices.
SILVER PRICE TECHNICAL ANALYSIS: DAILY CHART (DECEMBER 2019 TO DECEMBER 2020) (CHART 1)
An extremely volatile day to start the week produced few doji candles. In context, the doji candles suggest a break in the trend, and the dominant move having been higher, the doji warns of a potential reversal. Coupled with the bearish bar inside the day forming today, one can squint and see a cluster of evening star candles taking shape – a bearish trim formation.
After dropping below the 23.62% Fibonacci retracements of the 2020 low/high range at 25.5594, silver prices failed in the area that produced the October and November highs. The range, so to speak, holds between 21.6627 and 26.2233. Silver prices have now returned to their daily 5-EMA, and the daily envelope of the 5, 8, 13, and 21-EMA remains in a bullish sequential order. The daily Slow Stochastics are moving from an overbought condition, and the daily MACD is still above its signal line.
A deeper pullback cannot be ruled out, but will not negate the potential upside breakout attempt unless the July-December triangle is re-entered.
SILVER PRICE TECHNICAL ANALYSIS: WEEKLY CHART (DECEMBER 2010 TO DECEMBER 2020) (CHART 2)
Our long-term bullish view on silver prices remains. “The triangle’s recent consolidation is occurring against the backdrop of the breakout of the downtrend dating back to the August 2013 and July 2016 highs, suggesting that a long-term bottoming effort is still underway. If the triangle If silver prices were to top, there would be good reason to suspect that the move had significant technical tailwinds pushing prices higher. , but the technical structure remains clear from the point of view of this strategist.
Silver price, silver volatility at the same time
Both gold and silver are precious metals that typically enjoy safe-haven appeal during times of financial market uncertainty. While other asset classes dislike increased volatility (signalling greater uncertainty around cash flow, dividends, coupon payments, etc.), precious metals tend to benefit from periods of higher volatility as uncertainty increases. silver refuge call. The latest bout of concern over rising coronavirus numbers in the US and revelations about the mutated strain in the UK sparked more uncertainty late in the year.
VXSLV (SILVER VOLATILITY) TECHNICAL ANALYSIS: DAILY PRICE CHART (MAR 2011 TO DECEMBER 2020) (CHART 3)
Money volatility (as measured by the Cboe Gold Volatility ETF, VXSLVwhich tracks the 1-month implied volatility of money as a derivative of SLV option string) was trading at 44.43 at the time of writing. The 5-day correlation between VXSLV and money the prices are +0.80 and the 20-day correlation is +0.91. A week ago, on December 15, the 5-day correlation was +0.80 and the 20-day correlation was +0.37.
IG Customer Confidence Index: Silver Price Prediction (December 22, 2020) (Chart 4)
Silver: Retail trader data shows that 88.95% of traders are net long with a ratio of long to short traders of 8.05 to 1. The number of net long traders is 7.78% higher than that of yesterday and 4.87% higher than last week, while the number of net-short traders is 1.20% lower than yesterday and 4.65% lower than last week.
We generally take a contrarian view of crowd sentiment, and the fact that traders are net long suggests that silver prices may continue to decline.
Traders are sharper than yesterday and last week, and the combination of current sentiment and recent shifts gives us a bearish contrarian trading bias for stronger silver..
— Written by Christopher Vecchio, CFA, Senior Currency Strategist