Silver price outlook:
- Silver prices face the imminent danger of losing the support of the multi-month rising triangle.
- As the delta option concerns the infestation of market odors, precious metals with higher sensitivity to growing conditions are poor; gold prices rising while silver prices fall.
- Recent mood swings suggest that silver prices have fallen in the near future.
Danger, Will Robinson
Silver prices face an imminent threat, fueled by the sudden and dramatic focus of financial markets on the delta option. The momentum of risk-taking that has reached the markets has seen the profitability of the US Treasury and both Japanese yen and US dollar strengthen. While a lower US return, a stronger JPY environment usually takes care of favorable conditions for silver prices, the context we find today suggests that this is not one of those favorable times.
And both gold and silver are precious metals that usually enjoy safe havens in times of financial market uncertainty, but the potential for economic newness caused by the delta has drawn investors’ attention to the positive nature of the silver safe during the economic crisis.
The relationship between silver prices and silver volatility is sharp
Both gold and silver are precious metals that are usually secured in times of financial market uncertainty. Although other asset classes do not like increased volatility (indicating greater uncertainty about cash flows, dividends, coupon payments, etc.), precious metals tend to benefit from periods of higher volatility as uncertainty increases the safety margin of silver. However, environments where silver prices fall despite higher volatility in silver tend to be problematic, to say the least.
VXSLV (SILVER BREAKDOWN) TECHNICAL ANALYSIS: DAILY PRICE CARD (July 2020 to July 2021) (CARD 1)
Silver volatility (measured by the Cboe Gold Volatility ETF, VXSLV, which tracks the expected 1-month volatility of silver derived from the SLV option chain) was 28.88 at the time of writing, creating a new 52-week low earlier this month. The 5-day correlation between VXSLV and silver price is +0.66 and the 20-day correlation is -0.48. One week ago, on July 13, the 5-day correlation was +0.57 and the 20-day correlation was -0.65.
TECHNICAL ANALYSIS OF SILVER PRICES: AGENDA (March 2020 – July 2021) (CARD 2)
The lateral coverage from last summer may fail. If, in the context of longer deadlines, this indicates the formation of a bull flag lasting several months, the forthcoming distribution cannot be explicitly rejected. Yesterday, the first daily closure took place outside the growing triangle, which suggests that there is an attempt to fall.
At present, silver prices are falling short of their daily 5-, 8-, 13- and 21-EMA envelopes, which are falling steadily. The daily MACD is below its signal line and the daily slow stochasticity has quickly fallen over the territory sold. Should silver prices return to the triangle by the end of the week, there is still reason to believe that a turnaround is taking place.
SILVER PRICE TECHNICAL ANALYSIS: WEEKLY (November 2010 – July 2021) (CARD 3)
The weekly schedule suggests that the outlook for silver is also changing in the longer term. Silver prices are no longer advancing in line with previous expectations: “Silver prices are holding on to a rising triangle for several months, staying on track to reach an annual high of 30,1365. If achieved, it would also represent a potential longer-term bullish breakthrough, with more evidence that a significant bottom has been cut; thereafter, the 2011 peaks should be taken into account. ”
The failure suggests that a deeper setback may occur if the 2011 high / 2020 low range of 20.6500 23.6% Fibonacci retracement.
IG CUSTOMER SENTIMENT INDEX: SILVER PRICE FORECAST (July 20, 2021) (CARD 4)
Silver: Retailer data show that 93.23% of traders are net long, the ratio of long to short traders is 13.76: 1. The number of net long traders is 3.46% higher than yesterday and 2.38% higher than last week. The number of net-short traders is 11.57% yesterday and 7.91% higher than last week.
Usually, we view the contradictory situation of the crowd, and the fact that traders are net tall indicates a continuing decline in the price of silver.
Positioning is longer than yesterday, but less than last week. The combination of the current mood and recent changes gives us an even more mixed silver trading bias.
– Written by Senior Currency Strategist Christopher Vecchio, CFA