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Silver Becomes Attractive to Investors Seeking Safe Haven Against Volatility

By:
James Hyerczyk
Updated: Mar 14, 2023, 12:52 GMT+00:00

Silver prices spiked higher following collapse of Silicon Valley Bank as crisis sparked hopes of Fed slowing down aggressive monetary policy.

Silver

In this article:

Key Takeaways

  • Silver’s safe-haven appeal drawing in investors amid market turmoil.
  • Non-yielding silver more attractive as traders no longer anticipate 50-basis point rate hike.
  • Silver future prices dependent on effectiveness of Fed’s measures in response to Silicon Valley Bank collapse.

Overview

On Tuesday, the price of silver is declining ahead of the release of the US consumer inflation report for February.

Despite the anticipation of strong consumer prices, which could have resulted in a 50-basis point rate hike from the Fed at the upcoming meeting, the collapse of two US banks has changed the conditions.

May Comex Silver futures are currently trading at $21.670, down $0.253 or -1.15% as of 10:33 GMT.

Silver Prices Surge on Safe-Haven Buying

Following the collapse of Silicon Valley Bank, the safe-haven appeal of silver drew in investors, resulting in a surge in prices. This crisis also gave rise to hopes that the US Federal Reserve would have to slow down its aggressive monetary policy. Despite regulatory efforts to control the turmoil, the US dollar and Treasury yields continued to decline, making non-yielding silver an attractive investment.

Given the current situation, many investors are turning silver as a safe haven against volatility and risk.

As a result, silver is becoming more attractive even though it doesn’t yield any interest, since traders no longer anticipate a 50-basis point rate hike by the Federal Reserve next week. Instead, the current projection is for a 25-basis-point move, with some expecting no hike at all.

The future of silver prices depends on whether the Fed’s measures prove effective. If the Silicon Valley Bank’s bankruptcy is deemed an isolated incident, silver may lose some of its recent gains. However, if the crisis leads to a sustained reversal in the Fed’s policy, silver may remain in demand.

Daily May Comex Silver

Daily May Comex Silver Technical Analysis

The main trend is up according to the daily swing chart. The trend turned up on Monday when buyers took out $21.40. A move through $19.95 will change the main trend to down.

The main range is $24.93 to $19.95. Its retracement zone at $22.44 to $23.03 is the primary upside target.

The minor range is $19.95 to $22.05. Its retracement zone at $21.00 to $20.75 is the nearest support area.

Daily May Comex Silver Technical Forecast

Trader reaction to $21.93 is likely to determine the direction of the May Comex Silver market on Tuesday.

Bullish Scenario

A sustained move over $21.93 will indicate the presence of buyers. This could trigger a surge into $22.44 to $23.03. Look for sellers on the first test of this area. Overtaking $23.03, however, will indicate the buying is getting stronger. This could trigger an acceleration to the upside with $24.93 the next target.

Bearish Scenario

A sustained move under $21.93 will signal the presence of sellers. This could lead to a sharp break with $21.00 to $20.75 the next target area.

Since the main trend is up, buyers could come in on the first test of this area. If it holds then prices are likely to move higher. If $20.75 fails then the selling could lead to retest of $19.95.

For a look at all of today’s economic events, check out our economic calendar.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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