Silver: No Sustainable Trend Reversal So Far

Since the last significant peak on December 4th, 2023, at USD 25.91, the silver price experienced a 15.3% sell-off in two waves over six weeks, reaching a low at USD 21.91, so far. This downturn thoroughly dampened the start of the new trading year. Nevertheless, there has been a small recovery over the last week, but it has not been sufficient for a sustainable trend reversal so far. Silver – No sustainable trend reversal so far.

At the same time, bulls in the gold market are trying to establish a new base above USD 2,000. However, this endeavor has not been particularly convincing in recent days. In fact, the technical situation had already deteriorated since the false breakout in early December. While gold is still holding above USD 2,000, the bullish momentum has given way to a sluggish and confusing consolidation.

On the other hand, the bears have not achieved much either. They have not been able to undercut the low of USD 2,002 from January 17th so far. Despite the seasonally favorable phase, the gold market remains in an unclear back-and-forth. Currently, neither side can decisively prevail, indicating no new impulses for the silver price in the short term.

Silver in US-Dollar – Daily Chart

Silver in US-Dollar, daily chart as of January 29th, 2024. Source: Midas Touch Consulting

Looking back, our silver analysis from December 21st was clearly too optimistic, as the anticipated recovery in the silver market ended on December 23rd, precisely at the 61.8% retracement level at USD $24.60. Subsequently, silver prices fell for almost four weeks with minimal interim recovery, reaching as low as USD 21.91.

However, 0ver the course of last week, silver has managed to stabilize. Particularly noteworthy is the shedding of the bearishly embedded daily stochastic, resulting in a small new buy signal. Possible recovery targets on the upside would include the descending 200-day moving average (USD 23.50) and the upper Bollinger Band (USD 23.68) in the next step. Thus, the recovery potential from the current price level is initially not even one US dollar.

On the downside, in recent weeks, the silver price has already undercut most immediate supports. However, the well-known support zone between USD 21.50 and USD 22.75 USD has held. The four-year-old upward trend-line (currently around USD 21.30) is slowly converging into this zone, reinforcing the stronghold.

It’s worth mentioning the lower Bollinger Band on the weekly chart (not shown here) at USD 21.59. Both Bollinger Bands are moving sideways, indicating a continuation of consolidation between USD 21.59 and USD 24.92.

In summary, the daily chart presents a slightly positive impression in the short term. Consequently, silver prices could potentially recover towards USD 23.70 to USD 24.00 USD. However, given the entrenched situation in the gold market, much more cannot be deduced at the moment.

It appears more likely that precious metal prices want to consolidate the sharp rise in October and November primarily over time with a volatile and confusing back-and-forth. The “worst-case scenario” for the silver price by spring might be a pullback towards USD 21.00 to USD 21.25. Nevertheless, the tense geopolitical situation can at anytime lead to new buying pressure in precious metals.

Silver in Euro – Daily Chart

Silver in Euro, daily chart as of January 29th, 2024. Source: Midas Touch Consulting

Calculated in Euro, the sell-off in the silver market at the beginning of January breached the four-year-old upward trend-line. Hence, the downward slide temporarily gained momentum. However, in recent days, there has been a retracement back to this broken upward trend-line.

Overall, the market continues the directionless back-and-forth of the past four years, as silver prices, in the broader picture, continue to move sideways. The breakout from this stubborn consolidation has once again been postponed.

Conclusion: Silver – No sustainable trend reversal so far

After a six-week pullback, silver is currently attempting a stabilization and recovery. However, without a clear new uptrend in the gold market, this endeavor remains challenging. While stock markets enthusiastically move from one high to the next, precious metal investors are currently disappointed. Nevertheless, there is no reason to sell your precious metals because we are confident that the sentiment and price development will present a diametrically opposite picture over the course of this year. However, until the Fed panics and lowers interest rates, precious metal investors will need to exercise patience.

In the medium term, as contrarians, we still see the greatest opportunities in precious metals, considering the intact but largely ignored breakout movement in the gold price in 2024.

*********