Silver Price to Decline Below $20 On More Fed Action, China Lockdowns

Summary:

Silver price action looks set to drop below the $20 mark as concerns of additional rate hikes by the Fed remain.

The US Dollar has surged to 2-decade highs amid concerns of tighter monetary policy by the Fed. This is pushing down the XAG/USD pair this Thursday and bringing renewed bearish silver price predictions to the fore. There are also concerns that a stronger dollar from a hawkish Fed will slow global growth and dampen risk sentiment, a feeling that is putting demand off from the non-yielding industrial metal.

Despite Wednesday’s data showing that consumer price inflation has probably peaked, there were indications that inflation would likely stay at decades-high levels, thus leaving room for more rate hikes from the Fed.

Also dampening sentiment around the industrial white metal on Thursday was the announcement of stricter lockdowns in Shanghai and other regions in China. The lockdown in Shanghai is in its 7th week, and the nationwide COVID-19 cases appear not to have abated.

This scenario could slow manufacturing and economic growth, reducing silver demand. Silver price has been declining since the 16 April rate hike by the US Federal Reserve. As a result, the XAG/USD pair is down 3.04% as of writing.

Silver Price Outlook

The intraday decline has violated the 21.248 support level (22 July 2020 low) and has opened the door for a potential move to the south, targeting 20.661 (11 July and 4 August 2016 highs in role reversal). If the price deterioration continues, 19.504 (11 September 2019 high) becomes the next downside target. The 13 April/25 September 2017 highs at 18.690 round off potential short term targets south of 19.504.

On the other hand, any recovery in silver price follows a break of the descending trendline at the 21.663 resistance (9 May low). This would open the door for the price activity to move towards another barrier at 21.915 (11 May high) before 22.602 (6 May high) enters the mix. Additional northbound targets are at 23.164 and 24.569 (2 April high).