Silver Price: Triangle Formation Points to a Break-Out to $30

Summary:

Silver price is forming a triangle pattern and there is a possibility that the price will climb back to $30 in the next few days.

Silver price (XAGUSD) is little changed today as traders wait for inflation data from the United States. The metal is trading at $26.75, which is slightly lower than yesterday’s high of $27.50. Other metals are mixed today, with gold falling by 0.75% and copper price rising by 0.65%.

Silver has been in a consolidation zone in the past few days. That has happened because of uncertainty about the future price of the metal after its parabolic rally in the past few months. For starters, silver price fell to an eleven-year low of $11 at the height of the coronavirus pandemic. After that, the price rallied to a high of $29.67 in August.

This rally happened for three main reasons. First, the Federal Reserve started printing unprecedented amount of money through its open-ended quantitative easing program. At the same time, the United States passed stimulus packages worth trillions of dollars. All this led to a weaker dollar, which tends to be supportive of other assets like silver, gold, and even stocks.

Second, silver price rallied because of the unprecedented spending unleashed by global governments. In the European Union, the block passed a $850 billion spending package. According to the package documents, most of this money will go towards renewable energy. And silver is an important metal used in the manufacture of solar panels. Similarly, in the United States, polls show that Joe Biden is poised to defeat Donald Trump.

Third, silver price has rallied because of low supply because of the pandemic. This week, we wrote that Hochschild, a leading silver miner expects to mine 10 million ounces less of the metal this year. Other firms like Polymetal and Fresnillo also expect to mine less but benefit from higher prices.

So, what next for silver prices? Analysts believe that the catalysts mentioned above are likely to remain and push the price higher. Still, there are other analysts who believe that the metal has gotten overbought and that it is bound to fall.

Silver price technical outlook

The daily chart shows that silver price has been in consolidation mode in the past few weeks. The chart also shows that the price is forming a triangle pattern. The lower side of this triangle connects the lowest levels on August 12 and 8^th September while the upper side connects the YTD high and the highest point this month. A look at this triangle shows that it has some time to go before it reaches the confluence zone.

Therefore, the price is likely to remain in this consolidation in the next few days. Since this triangle comes after a strong rally, I suspect that the price will break out higher and possibly retest the important level of $30.

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