Silver Price Prediction – Prices Crumble but are Oversold

Silver prices crumbled, declining more than 3.5% on Tuesday after sliding 1.8% Monday. The dollar consolidated but U.S. short-term treasury yields rose as market participants focused on the decision by President Biden to renominate Fed Chair Powell. Market participants are now pricing in a 50% chance that the Fed will tighten interest rates in May of 2022.

Technical analysis

Silver prices dropped sharply breaking through target support near an upward sloping trend line that comes in near 23.95, which is now seen as resistance. Target support is seen near the November lows at 23.02. Medium-term momentum has turned negative as the MACD (moving average convergence divergence index) generated a crossover sell signal. This scenario occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line. Short-term momentum is also negative as the fast stochastic recently generated a crossover sell signal. Prices are oversold as the fast stochastic is printing a reading of 1, below the oversold trigger level of 20 which could foreshadow a correction.

The Fed and the Administration are Poised to Go to War on Inflation

The President of the United States has received the message and is focused on reduce prices. President Biden introduced his nominations for Federal Reserve Chair and Vice Chair on Monday and in each of their speeches, they mentioned inflation. The Fed is now poised to fight inflation, and the market is willing to help them along by raising rates immediately. Higher rates will reduce growth and potentially reduce costs. The Biden Whitehouse also announced a release of the SPR to provide gasoline relief.