Silver price outlook after positive Chinese manufacturing data

By: Faith Maina
Faith Maina
Faith strives to break down complex developments so investors can make better informed decisions. When Faith is not immersed… read more.
on Nov 30, 2021
  • Silver price is trading within a tight range.
  • Positive Chinese manufacturing PMI has boosted its industrial outlook.
  • It remains under pressure amid a strong US dollar despite declining Treasury yields.

Silver price has been on a decline for two weeks. A week ago, it extended its losses by dropping below the crucial level of $24. In the new week, the US dollar and Chinese industrial data are the key drivers.  

Chinese manufacturing data

In the new week, investors were keen on the Chinese manufacturing PMI scheduled for release on Tuesday. China is the leading consumer of silver and other industrial metals globally. As such, progress in its economic growth influences silver price movements.

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Analysts had forecast a reading of 49.6, which would have been a slight improvement from October’s 49.2. However, it would mark the third consecutive month of reduced industrial production. The prediction was founded on a decline in China’s domestic demand. Based on this forecast, silver price was expected to record further losses.

Interestingly, the released data has surpassed analysts’ expectations. The reading of 50.1 is an indication that eased energy shortages in the Middle Kingdom boosted industrial production in November. Nonetheless, silver price has reacted rather subtly to the news. Granted, it has bounced off Monday’s low of $22.76. However, it is now trading within a tight range as it experiences resistance at $23.00.

US dollar

In addition to its industrial demand, silver price movements are further linked to its status as a precious metal. From this perspective, its ongoing downtrend is a result of the strengthening US dollar. Granted, the declining Treasury yields have pushed the dollar index below the support zone of $96. The benchmark 10-year yields are at 1.42 after surging to 1.69 in the previous week. This downtrend is expected to offer some relief to silver price.

However, amid concerns over the latest COVID-19 variant – Omicron, greenback safe-haven appeal has sustained its uptrend. Precious metals tend to have an inverse correlation with the US dollar.  

Silver price prediction

Silver price is trading within a tight range even as it remains on a downtrend. The upper and lower borders of the aforementioned horizontal channel are 23.00 and 22.76 respectively. At the time of writing, it was up by 0.16% at 22.93.

On a four-hour chart, the precious metal is trading below the 25 and 50-day exponential moving averages. With an RSI of 29, it is still in the oversold territory.

In the near term, I expect silver price to remain within the current horizontal channel. Past the upper border, the resistance level will likely be along the 25-day EMA at 23.37. On the flip side, a further decline below the lower border may have it find support at 22.34. In the short term, the crucial level of 24.00 will likely remain evasive.

silver price
silver price
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