Silver Price at Risk of a 10% Pullback to $23.8

Summary:

In this article, we explain why the silver price is at risk of dropping by 10% to $23.8 in the near term. We talk about the head and shoulders pattern

The Silver price has retreated slightly in a slow trading day. It is trading at $26.40, which is slightly below yesterday’s high of $26.67. It is still up by more than 11% this month. Other metals like gold, copper, platinum, and palladium prices have also retreated.

What happened: Silver has been in a price-discovery phase in the past few months. The price surged to a multi-year high of $30 in February and then crashed by 20% to $23.80. There are several reasons why the metal has underperformed. For one, most investors have abandoned the “old-school” metals to the high-flying cryptocurrencies.

Second, it has lagged as the market considers the demand and supply dynamics. While supply is expected to rise this year, there are concerns about whether there will be significant demand. Third, since silver is both an industrial and precious metal, the recent movement of US bond yields has had a role. Indeed, the recent gains is partly because of the bond market that has pushed the US dollar substantially lower. So, what next for silver?

Silver price forecast

The daily chart shows that the silver price has been on a slow rally recently. Along the way, the metal has formed an ascending channel pattern that is shown in pink. Because of its size, we can see that this rally is not as strong. A closer look at the chart also shows that it has formed a head and shoulders pattern. Indeed, the current channel is part of the right shoulder.

Therefore, in my view, the metal will soon break out lower. If this happens, the next key support level to watch will be the neckline at $23.86, which is 10% below the current level. This trend will be invalidated if the price rises above $28.