Silver price prediction amid raging forces as a precious and industrial metal

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 Jan 17, 2022
  • Silver price is reacting to the higher Treasury yields and subsequent support on the US dollar.
  • In the industrial front, strong Chinese data are impacting the metal.
  • Investors are bracing for the Fed meeting scheduled for the coming week.

Silver price has begun the week with forces linked to its status as an industrial and precious metal at play. While strong Chinese data is offering support to the metal, higher Treasury yields are weighing on its prices.

Higher yields

Treasury yields have extended Friday’s gains as investors eye the Fed meeting scheduled for the coming week. Since the beginning of the year, the benchmark 10-year US bond yields have risen by about 16.90% as the markets brace for the tightening of the Fed’s monetary policy. At the time of writing, it was up by 4.81% at 1.78%.  The 30-year and 2-year yields are also up by 0.57% and 0.20%.  

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As is often the case, higher Treasury yields have boosted the US dollar while exerting pressure on silver and other commodities. The dollar index, which tracks the value of the greenback against a basket of six major currencies has held steady above the psychologically crucial level of $95.00 after rising above this level on Friday.

Chinese data

In addition to its appeal as a precious metal, silver is also a key industrial metal. Subsequently, it is reacting to the strong economic data released on Monday from China. The Middle Kingdom is the leading consumer of silver and other industrial metals. As such, positive numbers from the country creates a favourable environment for silver price.

To begin with, industrial production in China grew by 4.3% in December on a year-over-year basis. Analysts had predicted a reading of 3.6%, which would be lower than the prior 3.8%. Besides, the nation’s GDP rose by 1.6% in Q4’21 compared to 0.2% in Q3’21.

Silver price prediction

Silver price has bounced back above the crucial level of 23.00 after dropping below it on Friday. At the time of writing, it was up by 0.62% at 23.10.

On a four-hour chart, it is trading above the 25 and 50-day exponential moving averages. It is also above the long-term 200-day EMA.

In the short term, I expect silver price to trade within the horizontal channel of between Friday’s high of 23.30 and the 50-day EMA at 22.83. A move above the channel’s upper border will give the bulls an opportunity to retest 23.50, which has been evasive since late November. On the flip side, a move below the range’s lower border may place the support at 22.67 or lower at 22.47.

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