Silver Price Forecast: New Yearly Lows After Symmetrical Triangle Breaks - Levels for XAG/USD

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SILVER PRICE OUTLOOK:

• Silver prices broke out of multi-week symmetrical triangle to the downside as anticipated, falling to fresh yearly lows.
• A steeper drop towards 18.7064 may be in its early stages.
• However, recent changes in sentiment suggest that silver prices have a bullish bias in the near-term.

FUNDAMENTALS SPUR TECHNICAL BREAKDOWN

Silver prices established a fresh yearly low today, continuing a stretch of sharp selling pressures after the symmetrical triangle noted last week gave way. These are the lowest levels seen since July 2020, and there’s little reason to think that the worst is over yet.

It remains the case that fundamental headwinds remain significant. The ongoing rise in US real yields – nominal US Treasury yields less US inflation expectations (as measured by breakevens and inflation swap forwards) – coupled with global recession concerns has curated a difficult environment for silver prices. Accordingly, nothing has changed: the “weak fundamental narrative for silver prices underpins a still-weak technical outlook.”

 

SILVER PRICES AND VOLATILITY RELATIONSHIP FLIPS

Both gold and silver are precious metals that typically enjoy a safe haven appeal during times of uncertainty in financial markets. While other asset classes don’t like increased volatility (signaling greater uncertainty around cash flows, dividends, coupon payments, etc.), precious metals tend to benefit from periods of higher volatility as uncertainty increases silver’s safe haven appeal. It may take another surge in US equity market volatility for silver prices to find some stability in the short-term.

Jun 30, 2022 | DailyFX
Christopher Vecchio, CFA, Senior Strategist