Silver prices have risen significantly this year, hitting an all-time high of $54.48 per ounce, marking a significant increase of around 88%. The rally has been underpinned by strong demand along with the persistent supply shortage.
For instance, silver refineries in India continued to receive strong demand from local buyers ahead of the religious festival season, with goods at Vipin Raina, India’s largest precious metals refinery, running out for the first time in its history.
The white metal posted a sharp decline on Tuesday, falling 7% to record its biggest daily drop since April 4.
This decline was due to the following reasons:
1: Profit Taking
Silver prices fell below $50 an ounce on Tuesday, retreating from record highs reached last week, as investors booked profits following a sharp rise driver the previous nine consecutive weeks.
2: Easing US-Sino Trade Tensions
The white metal faced pressure as risk appetite improved, supported by easing trade tensions between the U.S. and China and hopes for an end to the U.S. government shutdown.
U.S. President Donald Trump said he expects to reach a fair-trade agreement with Chinese President Xi Jinping during their upcoming meeting in South Korea.
On the other hand, Kevin Hassett, director of the National Economic Council, indicated that the government shutdown could end this week, raising hopes that the U.S. government shutdown will end soon.
3: US & China Silver Inflows
Large shipments of silver from the United States and China flooded the London spot market last week, easing the liquidity crisis in the world’s largest over-the-counter precious metals trading center and pushing prices down as market supply increased.
4: Dollar Firms
The rise of the dollar also contributed to the decline in silver, which is hovering near its highest level in 10 days due to the easing of trade tensions.
Meanwhile, traders are awaiting Friday’s key U.S. inflation report ahead of an expected interest rate cut by the Federal Reserve next week.
Technically Analysis:
Silver rose during today’s trading by 1.3% as it held above the simple moving average 9 on the four-hour timeframe, but the relative strength index still shows negative signs as the price moves below 50 level.
Scenario 1:
Silver is currently trading above the daily pivot point at $49, looking to stabilize above it to reach the first daily resistance level at $50.25. It should be noted that if the price stabilizes above this level, it may resume its recovery, heading towards the second resistance level of $51.58.
Scenario 2:
If silver continues its downward correction, it may retest the key support level at $46.60, where a sustained move below it could extend losses towards $45.40.