Silver Price Outlook:
- Silver prices traded below the 61.8% Fibonacci retracement of the 2020 low/2021 high range.
- After breaking through 18.7064, a bigger sell off towards 16.000 could still be in the works.
- However, rRecent changes in sentiment suggest that silver prices have a mixed short-term bias.
Rising interest rates and fears of recession
Once again, silver prices set a new yearly low today, a continuation of the boosted selling following the bearish breakout of the symmetrical triangle in the second half of June. Gray metal crossed 18.7064, a key level defined at the end of Junesuggesting that an even deeper setback is still in progress.
The fundamental side of the equation has not changed. “The continued rise in U.S. real yields – nominal U.S. Treasury yields minus U.S. inflation expectations (as measured by breakevens and inflation forward swaps) – coupled with global recession fears has created a challenging environment for prize money.” A weak fundamental narrative continues to underpin an equally weak technical perspective.
Silver prices and the volatility relationship are eroding
Both gold and silver are precious metals that generally 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. A lackluster volatility environment in US equities does little for silver prices in the near term.
VIX (US S&P 500 VOLATILITY) vs Silver Price
US stock market volatility (as measured by the US S&P 500 volatility index, VIXfollowing the expectation of stock market volatility based on S&P 500 index options) was trading at 26.33 at the time of writing. The 5-day correlation between the VIX and silver the prices are -0.84 and the 20-day correlation is -0.19. A week ago, July 7, the 5-day correlation was -0.67 and the 20-day correlation was -0.17.
SILVER PRICE TECHNICAL ANALYSIS: DAILY CHART (July 2020 to July 2022) (CHART 2)
With a new 2022 low on the books, silver prices met a set expectation at the end of June: “a move towards the 61.8% Fibonacci retracement of the 2020 low/2021 high at 18, 7064”. The selloff in silver prices is consistent with the bearish breakout of the symmetrical triangle a few weeks ago, as the previous direction was down. Momentum retains its bearish hue. Silver prices are below their daily envelope of 5, 8, 13, and 21 EMA, which is in bearish sequential order. The daily MACD continues to drop below its signal line, and the daily Slow Stochastic remains in oversold territory. A “sell the rally” outlook remains appropriate for the foreseeable future.
SILVER PRICE TECHNICAL ANALYSIS: WEEKLY CHART (November 2010 to July 2022) (CHART 3)
After breaking the 61.8% Fibonacci retracement of the 2020 low/2021 high range at 18.7064, a larger reversal may yet occur. The next lower level would be the 76.4% Fibonacci retracement at 16.0061. Silver prices are below their weekly EMAs of 4, 8, and 13, and the EMA envelope is aligned in a bearish sequential order. The weekly MACD is trending lower below its signal line, while the weekly slow stochastic remains in oversold territory. He argues that “confidence remains high in the idea that the path of least resistance is lower.”
IG CUSTOMER SENTIMENT INDEX: SILVER PRICE FORECAST (July 14, 2022) (CHART 4)
Silver: Retail trader data shows that 80.04% of traders are net long with a ratio of long to short traders of 4.01 to 1. The number of net long traders is 0.62% lower than that of yesterday and 0.24% higher than last week, while the number of net-short traders is 8.26% lower than yesterday and 214.46% higher than last week.
We generally take a contrarian view of crowd sentiment, and the fact that traders are net long suggests silver prices may continue to decline.
Positioning is longer than yesterday but shorter since last week. The combination of current sentiment and recent shifts gives us another mixed bias for silver trading.
— Written by Christopher Vecchio, CFA, Senior Strategist