Silver extended its correction from the recent highs above $28, and we could see even lower prices in the weeks ahead if the U.S. dollar remains strong. Silver usually rises when the economy is in a slump, so the higher dollar and expectations for rising interest rates are bearish for this precious metal.
Fundamental analysis: U.S. dollar’s strength is the reason that is driving Silver lower
Silver has extended its correction from the recent highs registered in the third week of May and technically looking, this precious metal’s price could fall even more in the upcoming days. The U.S. Federal Reserve had a monetary policy meeting last week and left the interest rate unchanged but switched to a more hawkish tone.
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Several Fed officials expect hikes by 2023 because inflation accelerated faster and could be more persistent than expected. Investors usually buy Silver and gold to hedge against inflation, but last week we had a different practice, and the focus remains on the dollar.
The prospect of interest rate hikes positively influences the U.S. dollar, and those whose interest is to invest in precious metals like Silver should have the U.S. dollar on their “watch list.” The global business activity is recovering, and the U.S. dollar’s strength is one of the reasons that is driving Silver lower.
“The most important driving force behind the price slide is the massive appreciation of the U.S. dollar, which has gained more than 2 cents since the Fed’s meeting on Wednesday. Higher yields also pose quite a burden for Silver,” said an analyst from Commerzbank.
The yield on the U.S. 10-year bond rose 1.7 basis points to 1.55%, and investors will continue to pay attention to the bank’s commentary looking for any clues.
Technical analysis: $25 represents a very strong support level
The price of Silver has weakened from its highs in May, while the $27 and $28 levels have acted as support and resistance last several weeks.
The important support level currently stands at $25, and if the price falls below $25, it would be a firm “sell” signal. The next price target could be around $24 or even below.
On the other side, if the price jumps above $27, it would be a signal to trade Silver, and we have the open way to $28.
Silver extended its correction from the recent highs above $28, and if the price falls below $25, the next price target could be around $24 or even below. The most important driving force behind the price slide is the massive appreciation of the U.S. dollar, and investors will continue to pay attention to the U.S. Federal Reserve comments.
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