Silver Prices Could See Further Gains If $20 Breached - SocGen

NEW YORK (July 24) Silver prices are bumping up against $20-an-ounce level and if the area is “convincingly cleared” then the metal could see further gains, perhaps to $22, said Societe Generale on Wednesday.

There is heavy selling interest at $20, based on the number of December options positions, the firm said, but technical charts turned positive when the 10-day moving average crossed above the 20-day moving average.

“These conflicting signals point to renewed volatility in the silver price, something to which most silver investors are fully accustomed. If the $20 level is convincingly cleared then we can expect an attack on $22, which is a Fibonacci retracement level from the drop from $35.36 last October,” the firm said.

Strong demand in India and China supports silver, and there’s been renewed exchange-traded-fund buying in silver after dovish testimony from Federal Reserve Chairman Ben Bernanke earlier this month, they said.

The gains in silver come on the back of buyers seeing bargains in the metal after the recent fall in price, along with some switching to silver jewelry from gold because of economic austerity, they said. Further gains are likely, but could be limited.

“The price has therefore recovered towards $20 in the first weeks of July, and has the potential to sustain a short-covering rally towards $22, but silver remains in surplus, the majority of both supply and demand is not price-responsive and silver is likely to remain largely bound to gold. We continue to expect a bear market for the longer-term, with prices drifting towards a $15 average in 2017,” they said.