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While gold was the whipping boy in the commodity space on Tuesday, falling some $30 during an otherwise quiet session, the selling pressure was not quite so harsh for silver. Is it now the time for the grey metal to play catch up?

The Technical View:

There were some bearish technical developments for the price of silver on Tuesday including a bearish crossover on the daily MACD, which suggests that momentum is to the downside. While gold broke below symmetrical triangle support, the silver price is testing a well-trodden path: $18.85, which has held as support three times since December.

So can silver pull it off again a fourth time? The silver price has been particularly choppy for much of May, and there has been limited upside, suggesting that the bears have the upper hand and there could be further losses in store for the grey metal.

The Fundamental View:

The fundamental picture is mixed for silver. It tends to move in the same direction as gold, yet it is also an industrial metal, and is sensitive to the global growth outlook. The trouble for silver bulls is that the global economic outlook remains cloudy: China’s data has not picked up enough to boost the global growth outlook. The UK’s economy looks like it may be topping out, and the US remains in flux after a weak start to 2014. Thus, the technicals could dominate the medium-term direction for silver, and right now they point to a resumption of the downtrend.

Levels To Watch:

Key support includes:

• $18.82 – the low from Dec 31st, is key support.
• $18.22 – the low from 28th June, and the lowest level of the last 12 months.
•  A breach of the $18.00 zone brings into view the early 2010 lows around $15.

If gold recovers in the short-term then we could see a mini recovery in silver, although we continue to think that the upside remains limited. Resistance levels of note include:

• $19.66 – the May 26th high.
• $20.12 – the 38.2% Fib retracement of the Feb – May sell off.

Takeaway:

• Silver came under selling pressure on Tuesday, however it fared better than gold.
• The technical picture turned bleak for silver after the bearish crossover on the daily MACD (see the chart below), which suggests momentum is to the downside.
• $18.84 – the Dec 31st low, is a critical support level, we anticipate further selling pressure if we get a daily close below this level.

Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warrant that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, nor does the author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

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