Silver: Critical Test at $31.5 to Determine If New Uptrend is Underway
2024.09.17 06:43
has recently made a significant leap, tracking ‘s push for new highs. After finding support around $27 in early September, silver surged nearly 10% last week, outpacing gold’s 3% gain.
This move allowed silver to break through a key resistance level, hinting at a potential short-term trend reversal. This week, silver has crossed the $30 mark and is now eyeing the highs from July.
The surge in silver demand aligns with rising recession concerns about the global economy. Many are speculating that the might cut rates by 50 basis points in its upcoming , driven by worries over a possible recession.
Silver Pauses Before Fed Decision
While the recent increase in precious metal demand might seem linked to expectations of lower Fed rates, the underlying factor appears to be growing recession fears.
The outlook for silver remains somewhat mixed. If recession fears lead to economic stagnation, silver’s industrial demand could drop, potentially impacting its price negatively.
Conversely, during economic slowdowns, silver might see increased investment alongside gold as a hedge against uncertainty, which could stabilize the market. Geopolitical risks might also spark more speculative buying, supporting a moderate uptrend.
A pullback could occur if global markets stabilize, as investors might shift their focus to riskier assets in a more liquid environment. This could dampen silver’s demand. Additionally, short-term profit-taking might also temper the uptrend.
With the Fed preparing to start its rate-cutting cycle, silver faces a critical test in the coming days to determine if its recent uptrend will continue.
Critical Levels for Silver
Technically, silver’s recent indicators suggest an ongoing upward trend. The recent surge has broken out of a descending channel that’s been in place since May.
Short-term EMA values are rising sharply, and the Stochastic RSI on the daily chart is in the overbought zone, although it typically supports demand as long as it stays above 80.
Silver is currently testing the Fib 0.786 resistance at $31.2. To break through this level, silver will need additional catalysts, as current data might already be factored into prices, potentially slowing momentum.
The Fed’s stance on rate cuts and its economic outlook could be pivotal. If signals of economic stagnation emerge, they could boost silver demand, potentially helping it surpass $31.2 and target $32.5.
Such a move would indicate a matured trend, with the potential for silver to reach $34-$36 in the short term.
On the other hand, if silver fails to break the $31 resistance, profit-taking might increase, leading to a retest of $29. If this level holds, the uptrend could strengthen. However, if $29 support fails, the downtrend might extend towards $27.
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