Silver Price Forecast: How Bad Have Bulls Been Harmed?

Silver Price Forecast Overview:

• Silver volatility has gone up in recent days, but silver prices have come down. That’s not a good sign, as silver price and silver volatility typically enjoy a positive correlation.
• Nevertheless, long-term technical studies still suggest that a bottoming process is underway, and even a near-term pullback in silver prices has not and may still not disrupt the narrative.
• Recent changes in sentimentsuggest that silver prices have a mixed outlook in the short-term.

Silver Prices Suffer

Silver prices had a rough start to 2021, initially trading higher prior to plunging over -3.5%. The surging coronavirus pandemic has put the jilted US economy back into a state of lockdown, which in the spring 2020 proved detrimental to silver’s fundamental foundations. But now, even amid the prospect for more US fiscal stimulus, a spike in US Treasury yields without a concurrent rise in inflation expectations has actually boosted US real yields, undermining a key tenet of the silver price bullish narrative in 2020 and 2021.

Silver’s Longer-term Fundamentals Remain Solid

Longer-term, rising government deficits and prolonged low interest rates are an environment like what transpired in the 2009 to 2011 period. With the global economy is looking ahead to a period of significant growth post-pandemic, silver prices have a recent historical precedent to suggest that they will benefit over the coming months, if not longer. Long-term technical studies still suggest that a bottoming process is underway, and even a near-term pullback in silver prices has not and may still not disrupt the narrative.

Recommended by Christopher Vecchio, CFA

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SILVER PRICE TECHNICAL ANALYSIS: DAILY CHART (January 2020 TO January 2021) (CHART 1)

Silver prices have once again dropped below the 23.62% Fibonacci retracements of the 2020 low/high range at 25.5594, where previous rallies failed (most recently in October and November 2020).

Silver prices are below their daily 5-EMA, which while remaining in bullish sequential order, is souring quickly. Daily Slow Stochastics are quickly racing lower towards their signal line, daily MACD is now trending lower, still above its signal line. It is thus the case that, in the near-term, a deeper pullback can’t be ruled out, but won’t draw into question the potential bullish breakout attempt unless the July-December triangle is reentered.

SILVER PRICE TECHNICAL ANALYSIS: WEEKLY CHART (November 2010 TO January 2021) (CHART 2)

Our long-term bullish view on silver prices remains. “The recent triangle consolidation is occurring in context of the breakout from the downtrend dating back to the August…