Silver (XAG/USD) price appears to be consolidating after a sharp decline in the past two weeks. The precious metal tanked as the price faced an intense rejection from the $25.4-$26.8 supply zone. Silver price per ounce is currently in the midst of a recovery after closing the last two weeks with a 7% loss.
After a 1.5% bounce last Friday, XAG/USD is trading sideways on Monday. At press time, Silver is trading at $23.86 after rising by 0.04% during its London session. The minor gains appear to be caused by a correction in the DXY Index, which slid by 0.11% on the first trading session of the week.
While Gold price has also dropped significantly in the last two weeks, Silver is leading the latest drop in commodity prices. In fact, Copper and Zinc have also shown a negative price action during this time. There are multiple factors behind this drop in Silver price per ounce, but the biggest of them all is the slower-than-expected recovery in China.
Recent stats show that the Chinese economy is still lagging in recovery after the end of lockdown restrictions. This has intensified the recession fears and triggered a sell-off in Silver, Copper, and Zinc. A strong bounce in the DXY index further intensified this selling pressure. The next month’s FOMC meeting will play a key role for commodity prices.
The following XAG/USD chart suggests that the ongoing correction may go much deeper. This is because the price is yet to hit the 0.5 fib retracement level, which usually results in a potential reversal. This level currently sits at $23.04, which is 3.3% below the current price. The ongoing bounce is due to the bullish RSI divergence on 4H chart.
Therefore, the Silver price prediction of $23.04 appears to be quite valid, considering the momentum behind the ongoing downward push. To avoid this bearish outlook, Silver needs to reclaim the $24.6 level. However, on a higher timeframe, Silver and Gold still remain bullish for me.
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This post was last modified on May 22, 2023, 11:01 BST 11:01