Silver price analysis: A correction or end of the rally?

By: Stanko Iliev
Stanko Iliev
Stanko dedicates himself to providing investors with relevant information they can use to make investment decisions. He loves the outdoors, enjoys… read more.
on Mar 31, 2021
  • Silver has extended its correction from the recent highs registered in the first week of February
  • If the price jumps above $26, the next target could be around $28
  • If the price falls below $22, it would be a firm "sell" signal, and the next target could be around $20

Silver has weakened in March to levels we have not seen since December, and the current price stands around $24. Some analysts say that we could see even lower prices in the weeks ahead as the US dollar remains strong.

Fundamental analysis: the US dollar’s strength is one of the reasons that is driving Silver lower

Silver has extended its correction from the recent highs registered in the first week of February and technically looking, the price of this precious metal could fall even more in the upcoming days. Financial markets remain supported as investors bet on a recovery that is expected to deliver the fastest economic growth since 1984.

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The dollar index has returned at levels from November 2020, and the US dollar’s strength is one of the reasons that is driving Silver lower. FED raised its GDP estimate for 2021 to 6.5% from 4.2% last week, while the weekly jobless claims showed improvement in the US.

Rising US government bond yields continue to positively influence the dollar, which could further depress silver prices. Also, Biden’s massive spending plan is increasing the likelihood of inflation down the road, and that also lifts yields, making it expensive to hold Silver and gold.

The US president Joe Biden will announce today details of his “Build Back Better” plan, which includes $2 trillion for infrastructure spending across the country.

The Federal Reserve may not worry about the possibility of higher inflation, but higher inflation expectations will maintain government debt yields up for the upcoming period. Investors usually buy Silver and gold to hedge against inflation, but today we have a different practice, and the focus remains on the dollar.

On the other side, vaccine immunization will not soon end the Covid-19 crisis, and there is still a long way to fight against this pandemic. Newly reported COVID-19 cases are back on the rise, so the risk of a renewed slump is real.

“Without significant restrictions, the number of new infections will increase to the point that the health system risks being overwhelmed by April. The spread of the variants is driving the increase, and given the current infection dynamics, forceful action is still required,” said Hans Kluge, the WHO’s Europe director.

Silver usually rises when the economy is in a slump and fundamentally looking; there is still no clear trend for this precious metal.

Technical analysis: If the price falls below $22, it would be a firm “sell” signal

Data source: tradingview.com

The important resistance levels are $26, $28, and $30; $22 and $20 represent strong support levels. If the price jumps above $26, it would be a signal to buy Silver, and we have the open way to $28.

On the other side, if the price falls below $22, it would be a firm “sell” signal, and the next target could be around $20.

Summary

Silver has extended its correction from the recent highs registered in the first week of February and technically looking, the price of this precious metal could fall even more in the upcoming days. The dollar index has returned at levels from November 2020, and the US dollar’s strength is one of the reasons that is driving Silver lower.

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