Silver price prediction with the 200-day EMA in focus

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 Dec 23, 2021
  • Silver price has edged higher amid a decline in the US dollar.
  • The metal is also reacting to data on the US GDP.
  • Concerns over the Omicron variant will likely curb silver price gains.

Silver price is trading higher following a decline in the value of the US dollar and the upward revision of the US GDP in Q3’21. However, the probable rebound of the greenback and ongoing concerns over the Omicron variant will likely curb its gains.

Decline in US dollar

Silver price edged higher earlier in Thursday’s session following a decline in the greenback. Precious metals tend to have an inverse correlation with the value of the US currency. The dollar index, which tracks the value of the dollar against a basket of six currencies, dropped close to a one-week low at $96.02. Nonetheless, it has since bounced off December’s crucial support zone of $96.

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The drop resulted from an improvement in risk appetite amid the rising optimism on global economic growth. However, the Omicron variant remains a major concern among investors. The latter factor will likely curb silver price gains in the ensuing sessions.

Industrial demand

At the same time, silver price got a boost from the higher-than-expected US GDP reading. In addition to its status as a precious metal, silver is also an industrial metal. As such, an environment of heightened industrial production tends to boost its value.

Data released on Wednesday by the Labor Department showed that the US GDP grew by an annualized rate of 2.3% in Q3’21. The figure was an upward revision from the previous estimate of 2.1%. In comparison, it increased by 6.4% and 6,7% in the first and second quarter respectively. Notably, growth in the third quarter was curtailed by the Delta variant and inflation-related concerns.  

Silver price prediction

Silver price has edged higher as an extension of Wednesday’s gains. Earlier in the week, the precious metal had declined to a low of 22.19. Since then, it has rebounded by about 3.07%.

At the time of writing, it was up by 0.3% at 22.86. On a four-hour chart, it is trading above the 25 and 50-day exponential moving averages. Based on these technical indicators, it will likely record further gains in the ensuing sessions. Besides, it is slightly below the 200-day EMA.

In the short term, I expect silver price to remain under pressure, even as it records some additional gains. From this perspective, it will likely continue to experience resistance along the 200-day EMA at 22.87. A rebound in the US dollar may have it pull back to the support zone of 22.55, which is along the 25-day EMA.

With a further decline, the bears would likely retest the week’s low at 22.19. On the flip side, additional bullish momentum may push the resistance level higher to 23.30.

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