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Silver Video 01.05.20.


Silver Is Under Pressure Amid Global Risk-Off Sentiment

Following yesterday’s wild action, silver has settled below $15.00 amid risk-off sentiment in the global markets caused by Donald Trump’s threat to put additional tariffs on China due to coronavirus.

Gold has returned back below the $1700 level, putting pressure on the whole precious metal segment, and it looks like profit taking activity continues after the recent upside move.

The U.S. dollar is flat against a broad basket of currenices, and the U.S. Dollar Index stays near the 99 level. Interestingly, the American currency is not gaining ground on a red day for markets despite its safe haven status.

This is good for silver as stronger U.S. dollar is a bearish catalyst for precious metals since it makes them more expensive for buyers who have other currencies.

It remains to be seen whether the sell-off in the world markets will turn into something material or the previous upside trend continues. Silver benefited from the initial market rebound but the correlation disappeared and silver is living a life of its own.

For silver, the main problem is its exposure to industrial demand which will be inevitably hurt during the current pandemic. Investment demand is also important but it is not clear whether it will be able to offset the decrease in industrial demand.

Technical Analysis

Currently, silver trades in the $14.60 – $15.50 range. It made two attempts to breach the support at $14.60 but both attempts were met with increased buyer support, and silver quickly rebounded back above $15.00.

There’s a risk that if silver stays below the 20 EMA for some time, it will transfer to a tighter $14.60 – $15.10 trading range and will make a third attempt to get below $14.60.

In this case, silver may gain additional downside momentum and quickly move to the next support area at $13.80 – $14.00. If this happens, the current upside trend will be over.

On the upside, the key resistance level is $15.50 near the 50 EMA. If silver manages to settle above this level, it will move to test April highs at $15.80. In case this test is successful, silver will likely return to pre-crisis levels at $16.50 and complete the rebound.

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