Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Silver: Is It A Buy After 4 Months In The Red?

By Investing.com (Barani Krishnan/Investing.com)CommoditiesSep 22, 2021 08:58
uk.investing.com/analysis/silver-is-it-a-buy-after-4-months-in-the-red-200497257
Silver: Is It A Buy After 4 Months In The Red?
By Investing.com (Barani Krishnan/Investing.com)   |  Sep 22, 2021 08:58
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

The “poor man’s gold” is having a particularly poor stretch.

Silver is in the red for a fourth consecutive month, hovering at under $23 an ounce in futures trade on New York’s COMEX after losing almost 20% from May’s close of above $28.

COMEX gold, in contrast, is down less than $130, or 7%, over the same period despite intense pressure from a rallying dollar.

Often viewed as a poor alternative to the yellow metal, silver is having an extraordinarily tough stretch after a blow to both its standing as an industrial metal and as a safe haven of sorts like gold.

Silver Monthly
Silver Monthly

All charts courtesy of SK Charting

Silver’s Uses: Jewelry to Electronics; Clean Energy to Telecoms

Unlike gold, which is predominantly used in jewelry and as an investment asset, more than 50% of silver’s demand originates from industrial use. As a malleable metal, silver is just as good as gold for jewelry. But it is also a good conductor of electricity, and used extensively in the manufacture of electronics components.

The transition to clean energy is expected to drive physical demand for silver in the coming years, as it is used for connections in electric vehicles and for components in solar panels. The rollout of 5G, or fifth generation telecom networks, is also set to become a growing source of demand. But these demand factors are likely to play out in a big way for silver in the future, not right away.

For now, silver’s uses across a range of industrial applications have an effect on its price—when manufacturing activity rises, the price increases due to high demand, while a fall in activity, such as during a recession, pulls the price lower.

Weak Global PMIs Weaken Silver

For that reason, monthly manufacturing PMI, or Purchasing Managers’ Index from around the world, is an important gauge of silver demand, as it provides an indication of industrial activity.

The global PMI compiled by JP Morgan and IHS Markit fell to a six-month low of 54.1 in August 2021 from 55.4 in July as output growth lost momentum in several major markets (a number above 50 indicates an expansion in manufacturing activity, while a number below that figure points to a contraction). This significantly weighed on silver in recent months.

Adding to that has been on-off speculation since June that the Federal Reserve will have to announce a taper of its excessively generous monthly stimulus of $120 billion for the US economy that the central bank has carried since March 2020.

Fed Taper Talk Another Bugbear For Metal

The Fed’s all-important Federal Open Market Committee holds its September meeting today, where speculation is rife again that a timeline could be established for the stimulus taper and an eventual hike in interest rates that have been at virtually zero the past 18 months.

Silver Daily
Silver Daily

Silver traded up from $23.84 on Sept. 2 to reach $24.80 on Sept. 6, but was back to $23.80 just ten days later.

It hit an eight-year high in February, breaching $30 an ounce the first time since 2013.

As precious metals strategist Paul Robinson noted in a blog on Tuesday, silver wasn’t exactly seeing much support at the current level.

“It will be interesting to see if this time around a lack of buying interest is indicative of a market that wants to finally take out a sizable level,” Robinson said. Adding:

“In the event we only see a modest multi-day recovery, odds will increase that another leg lower will develop. It will take a forceful driver higher to at least help stabilize silver, but even then the trend is decisively lower.”

Analysts at Jefferies have three scenarios for silver: a base case where the long-term price averages $20 per ounce; an upside scenario where it reaches $35 and averages $30 per ounce over the long term; and a downside scenario, where it declines to $15 per ounce with no improvement thereafter.

So, where is silver headed in the nearer term? And could it be a buy after four months in the red?

Charts Looking Mixed For Silver

Silver Weekly
Silver Weekly

Sunil Kumar Dixit, chief technical strategist at SK Charting in Kolkata, India, says trends revolving around the spot price of silver do not appear strong enough to assure steady returns for new long positions in the metal.

“The mid-term outlook for silver appears mixed with a bearish bias,” said Dixit.

“Recovery to the $24 handle is subject to prices holding above the 100 week-SMA, or Simple Moving Average, of $22.23.”

“If this fails, silver will run the risk of plunging to the 200-week SMA of $19.04.”

Dixit said the daily chart for spot silver showed a positive cross over in Stochastic RSI with a reading of 16/7. This could facilitate a recovery to test the middle Bollinger® Band of $23.65 and the 50-EMA of $24.17, conditioned by prices holding on to the strong side of $22.25, he added.

But in the event spot silver faced resistance at $22.90, prices can go weak below $22.25, with an initial low at $21.50, he said.

“The longer-term monthly chart suggests that spot silver is approaching extremely oversold territory, with a reading of 2.6 /14.3 indicating limited downside to the 50-month EMA of $20.62 and 100-month SMA of $18.28.”

The other highly-influential factor would be the gold/silver ratio, which is a calculation of the number of silver ounces that can be purchased by one ounce of gold, now trading at around $1,780 an ounce.

The so-called XAU/XAG ratio, denoted by the trading symbols of the two precious metals, is currently at 78. If it hits 82.5, it can make silver even less attractive to gold.

Disclaimer: Barani Krishnan uses a range of views outside his own to bring diversity to his analysis of any market. For neutrality, he sometimes presents contrarian views and market variables. He does not hold a position in the commodities and securities he writes about.

Silver: Is It A Buy After 4 Months In The Red?
 

Related Articles

Dmitriy Gurkovskiy
Crude Oil Reached New Highs Again By Dmitriy Gurkovskiy - Oct 25, 2021

Early in another October week, the oil market continues rallying and reaching new highs. Brent has already broken $86 and this growth is not over yet – the possibility of the oil...

Anastasiia Scavo
Gold Is Looking for a Rally By Anastasiia Scavo - Oct 22, 2021 1

When I was recently looking at the gold prices chart from the perspective of the coming months, I saw minor indications that prices may break through the strong resistance around...

Silver: Is It A Buy After 4 Months In The Red?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (4)
Michael Song
Michael Song Sep 22, 2021 20:26
Saved. See Saved Items.
This comment has already been saved in your Saved Items
it is legal in usa to spoof,racketeer and mafiosi banking...
Aaron Bailey
Aaron Bailey Sep 22, 2021 16:14
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Very interesting that the very company compiling PMI figures that supposedly impact silver’s price, is the same company fined over and over for spoofing and manipulation of the metals market, but then again maybe thats just a coincidence right? What silver needs is market regulators to do their jobs properly
Alun Benjamin
Alun Benjamin Sep 22, 2021 16:14
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Very adroit put, sir.
Alun Benjamin
Alun Benjamin Sep 22, 2021 15:04
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Don't fall for this garbage. The price of silver is determined by the U.S. Treasury via its instructions to the big bullion banks and using high frequency futures contracts. I order to carry out its insane "Green Deal" agenda, silver needs to be as cheap as possible so that the billions of solar panels and cabling for 100,000's of vehicular recharging points and millions of new electric vehicals chalked up to use them. If silver was to be allowed to reach fair value, all this, as well as the 5g Cellular Network rollout would be impossible due to price and availability constraints. I suggest you look elsewhere for a profitable investment.
Virendra Aggarwal
Virendra Aggarwal Sep 22, 2021 14:51
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Taper or no taper by the U.S Fed. Bond Yield bound to go up , up & up till at least January 2022. If you consider any relationship between Gold/Silver & Bond yield movements than what should be your views on Gold / Silver price scenario?
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email