U.S. Markets closed

Silver steadily heading towards $25 / ounce

Research Team

Main Points

  • Silver seems set to print Higher Low at $19.61 before Higher High around $20.83.
  • White metal eyes $25 in long term.
  • Current price of metal is less than its mining cost that may expedite the ongoing bullish trend.
  • Price consolidation above $25 is less likely due to improving US economy

Silver is in correction phase before resuming further upside movement. The metal closed at $20.18 per ounce with a false hammer sign on daily chart.

At the moment in Asian session on Thursday Silver is being traded at $20.01 with immediate support seen around $19.87 (55 DMA) ahead of 19.61 (50% fib level of 30 December to 14 January rally).

silver_price_body_Picture_3.png, Silver steadily heading towards $25 / ounce

On upside, the metal may find hurdles at $20.58 (swing high of previous wave) and then $20.83 (50% fib level of 10th October to 31st December rally). 100 DMA and 200 DMA are also closed to $20.83, making it a triple confluence level as shown above.

Wave analysis shows that Silver is going to print a Higher Low (HL) on daily chart around $19.61 before a Higher High (HH) near $20.83 as charted below;

silver_price_body_Picture_2.png, Silver steadily heading towards $25 / ounce

In bigger scenario the mental has formed a classic double bottom pattern, have a look at following weekly chart;

silver_price_body_Picture_1.png, Silver steadily heading towards $25 / ounce

Neckline, the highest point between two lows, is at $25.08 that would be a decisive level for Silver. A tough fight between bulls and beers is expected around $25.00. If bulls lose, then we may see a long term reversal from $25 that may end below $18. Keeping in view the macroeconomic scenario, this could be a likely case. However, if Silver breaks the neckline, then $25.08 would act as a crucial support level and the target can be anywhere above $30 in that case.

Average mining cost of Silver was $21.39 at the end of third quarter last year, thus the current price is less than the production cost. Miners operating in loss may consider closing down production if price remains below the cost of mining for a longer period of time, this may consequently cause reduction in supply and ultimately the price will tend to rise. Therefore in short term we may see a surge up to $25 per ounce.

A rise above $25 however seems a less likely scenario since the US central bank is all set to end Quantitative Easing (QE) completely by the end of current year and labor sector is performing better than expectations. Chances are very high that we may see stronger dollar in coming months that would not be a good sign for silver as well as other commodities.

Similarly overall improvement in the US economy may keep investors away from precious metals (so called safe heavens). Some analysts however believe that increased growth in the US could increase the demand for Silver and in turn increase in metal’s price.

In conclusion I say that short term bias is very bullish for Silver however consolidation above $25 / ounce does not look a likely scenario.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM.