silver price
If the Silver price ends the week below $22.32, it could signal the end of the 2021 bull market and a return to the teens. Spot Silver (XAGUSD) recovered from a fourteen-month low of $22.50 to close out last week in the green and crucially above the 100-week moving average for the third week in a row. However, the price faces severe headwinds, which could force a weekly close below the 100 WMA for the first time since May 2020. If that happens, the next technical level of support is $19.10.
Precious metals have been under the cosh for most of 2021. Despite rampant inflation, the traditional inflation hedges have performed miserably. In February, the Silver price reached $30.08, briefly exceeding the 2020 high of 29.87. Since then, XAGUSD has been trending lower, resulting in the price trading to the lowest since July 2020 last week.
In recent weeks, a more hawkish tone from the Fed has significantly soured precious metals sentiment. Last week, Fed Chair Jerome Powell spooked risk assets when he appeared to change his view on inflation from transitory to structural. As a result, bonds yield are screaming higher, taking the greenback with them and exerting downward pressure on Gold and Silver. Precious metals are non-yielding assets and have an inverse correlation to bond yields. Furthermore, the US Dollar typically follows bond yields higher, increasing the cost of Dollar-denominated commodities such as Silver.
The weekly price chart shows the current Silver price of $22.32 is just above the $22.34 close in October 2020. I consider this significant for two reasons. Firstly, the 100-week moving average is $22.33, almost the same as October 2020s lowest close. Therefore, if Silver ends the week below $22.33, it will be the lowest close since July 2020 and beneath the 100 WMA.
In this event, the outlook turns sharply negative. Subsequently, the Silver price could succumb to selling as long-term holders throw in the towel. Technically speaking, on the weekly chart, a close below $22.32 targets the 200 WMA at $19.10, which aligns with the multi-year highs of 2019. Only a finish above the 200 WMA averts the threat of imminent collapse. Therefore, how the Silver price ends this week could have far-reaching consequences.
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