Silver Price Prediction: The Downside Prevails As Manufacturing Falters

Summary:
• Silver price declined further on Thursday as the decline in manufacturing in the US and China added pressure to weak safe haven appeal.

Silver price declined further on Thursday, as investors continued to lock profits from precious metals ahead of high-impact US economic data. The grey metal was down by 4.5 percent as of this writing- the widest in a single day since June 7. Besides the US data, silver also faces selling pressure on account of declining manufacturing activities in leading economies.

What’s behind silver’s current predicament?

Both China and the US reported shrinking manufacturing activities in their latest macroeconomic releases. China’s National Bureau of Statistics reported that the country’s manufacturing PMI stagnated in June at 49.5, triggering concerns over a possible downturn in the world’s second-largest economy. Similarly, the S&P Global Manufacturing PMI showed that US Manufacturing activity contracted in July, coming in at 49.5 percent from June’s 51.6 percent and missing the forecast figure of 51.7. This signals a potential weak demand for silver, thanks to its use as an industrial metal.

Looking ahead, XAGUSD will get impetus from the safe haven front when US second quarter GDP figures come out later on Thursday. However, the greater impact is expected to come from the Personal Consumption Expenditure (PCE) index reading set for release on Friday, and which will influence Fed decision making on interest rates.

Momentum indicators

On the 4-hour XAGUSD chart, silver price is on a bearish momentum. The 20-SMA (blue line) has been below the 50-SMA (green line) for some time. A stronger call for the downside is seen in the crossing of the 50-SMA below the 200-SMA. This signifies a likely extension of the bearish control in the near-term.

Also, the RSI is at 21, which signals strong selling momentum. That said, it also indicates that the commodity is oversold, and a reversal could be imminent.

Resistance and support

On the 30-minute chart, silver price looks to extend the downside below the $28.00 pivot mark. The momentum will likely find the first support at $27.50, but extended control by the sellers at that point could breach that mark to send XAGUSD to $27.00. On the other hand, if the buyers manage to break above $28.00, they could build the momentum to move to the first resistance at $28.63. A break past that mark will signal stronger buying power, which could invalidate the downside view. Furthermore, the momentum could push the price higher to test $29.00.