Why Has Silver Price (XAG/USD) Crashed to 2-Month Lows? Here's Why

Summary:

Silver prices (XAG/USD) quickly cascade to 2-month lows below the $25 mark after risk aversion forces a flight to safety from capital assets.

Silver price (XAG/USD) continued the projected price move following today’s selloff, which is occurring as the greenback continues to gather strength in the FX market. Silver price lost 1.68% on the XAG/USD pair, despite a decline in the US bond yields on the 10-year note by half a percentage point this Thursday.

So what’s fuelling the decline in commodity prices in general and silver prices in particular? This has to do with the risk aversion that has hit the markets on Thursday, stemming predominantly from rising coronavirus cases in Europe and the unresolved chaos in the EU’s vaccination program against the coronavirus. This has fuelled fears of new lockdowns and a slump in industrial demand. Yesterday’s improvements in the PMI data did very little to boost bullish sentiment in silver, except perhaps to slow down its descent. This descent has resumed fully, sending silver prices to 2-month lows.

Technical Levels to Watch

Silver prices now near the end of the projected price move from the breakdown of the bearish pennant pattern. The contact with the support at 24.569 is the only barrier to the completion of this move at the support zone found at 23.966/23.617. Below this level, 23.164 and 22.549 form additional support levels.

On the other hand, slight recovery could follow a bounce at 24.569, with 25.386 and 26.034 serving as additional barriers to the north. These may serve as cheaper areas for bears to force a downtrend resumption if the existing commodities-negative and USD-positive sentiment persist.