Silver price had a mixed first quarter. After rising to a multi-year high of $30 in February, the price crashed by almost 20% and ended the quarter at $24.30. The same trend happened for gold, whose price dropped by more than 10% from its highest level this year.
What happened: Silver had an eventful quarter. In February, it was caught up in the Wall Street Bets (WSB) mania that saw its price soar to a multi-year high. As the mania ended, the price cooled down.
In the same period, the metal failed to react positively to the positive economic numbers from China and other Western countries. In general, these countries have accelerated their vaccination process and there are signs that they will go back to pre-pandemic levels later this year. The silver price usually does well when the global economy is recovering.
Further, the metal reacted mildly to the huge stimulus packages passed in the United States. The country passed more than $2.8 trillion and is on course to pass another package worth more than $2.3 trillion.
The silver price weakened mostly because of the overall stronger US dollar. The dollar index rose for the past three consecutive months as investors reacted to the higher US bond yields. Silver has an inverse relationship to the US dollar.
The daily chart shows that the silver price has been moving sideways in the past few weeks. It has been stuck between the support and resistance levels at $21.85 and $30. Also, the price is between the 38.2% and 23.6% Fibonacci retracement level and is slightly below the short and longer-term moving averages. The metal has also formed a head and shoulders pattern that is usually a bearish signal.
Therefore, in the next few weeks, I suspect that the price may keep falling as bears target the next support at $21.85. However, a break above the resistance at $26 will invalidate this trend.
