Add price alert

Technical analysis for Silver January 2022

Published by Karl Martin Karus in category Technical & Fundamental analysis on 02.01.2022
Gold price (XAU-SEK)
18 123,18 SEK/oz
  
- 49,90 SEK
Silver price (XAG-SEK)
216,29 SEK/oz
  
- 0,79 SEK

Compared to the gold price, the silver price moves much quicker. Gold price increased from 2018 August to 2020 August, with minor corrections. Silver price, on the other hand, moves differently. A lot of the time silver price is relatively steady and moves sideways.

In March 2020, the silver price started to move upwards – the price was 11.8 US dollars. In August 2020 silver price had reached almost 30 US dollars – this is a ca 150% price increase in 5 months. The silver price has been fluctuating between 21,5 – 30 US dollars from that point.

Technical indicator analysis

Trendlines / Support & Resistance

*Red lines are downtrend. The heavy red line is the long-term trendline.
*Green lines are uptrend. The heavy green line is a long-term trendline.
*Blue lines are short term support & resistance lines


(Picture 1. XAGUSD Trendlines / Support & Resistance)

  • Long-term downtrend and long-term uptrend lines are moving in a direction to form a triangle pattern. (it is not established yet).
  • The silver price is trying to push higher from the bottom resistance line. Breakthrough is currently not yet confirmed. It could also be a fakeout.
  • If silver breaks from the bottom resistance line, we can expect the bulls to try to push the price around 25 US dollars.

Fibonacci retracements


(Picture 2. XAGUSD Fibanocci retracements)

  • Most important Fibanocci retracements are 38.2% and 61.8%
  • The bottom resistance line and the 61.8% Fibonacci retracement are almost identical, which indicates a solid resistance area.
  • Silver price is trying to break through from this area, and when the silver bulls succeed, we can expect to price to move higher to the aforementioned 25 US dollar area.

Moving Averages

  • In Picture 1. and Picture 2. we see an unsymmetrical red line – this is a 250-day Moving Average.
  • The 250-day moving average is also considered a yearly moving average.
  • Why 250 days, not 364 days? It’s because on weekends markets are closed.
  • The 250-day moving average works as a support or resitance line – it depends on whether the asset price is trading below the 250 MA line or above it.
  • When looking the picture 2. we can see that 250 MA has worked well as a support/resistance area in the past.
  • When silver bulls push the price higher, watching the 250 MA line as a solid resistance area, is essential. This helps investors watch out for potential correction or a price spike even higher, potentially around 30 US dollars again.

RSI divergence

  • RSI is currently not overbought nor oversold.
  • The current situation indicates that the price could move higher because RSI is above the middle line of 50.
  • When considering that RSI suggests price moving upwards and silver bulls are trying to push through a crucial resistance zone, we can expect the price to reach the 25 US dollar range rather sooner than later.
  • We should keep an eye on RSI and the 250 MA line. If a strong RSI divergence forms near the 250 MA and upper resistance line, there is a high potential for the price to correct itself.

Fundamental analysis

According to the Silver Institute, physical supply in 2021 increased over a depressed 2020 by 8% to 1,056 million ounces but remained below the output for 2014-2016. Meanwhile, demand is up 15% this year at 1,033m oz, leaving a marginal surplus of just 23m oz. The question arises concerning demand patterns over the next few years when accelerating investment in non-fossil fuel energy and electricity. For silver, increasing demand for electric vehicles and upgrading of mobile networks to 5G can be added to photovoltaic demand. Forecasting the balance of supply and demand is always difficult for silver because of substantial and unforeseen changes in usage (remember photography?). Still, it seems reasonable to assume that silver will be one of an elite group of beneficiaries from global environmental policies. Read more @SeekingAlpha

Read also

  1. What effect does inflation have on the price of gold?
  2. Germans wary of inflation buying more gold
  3. Gold Demand Trends Q3 2021

Disclaimer: This article is for informational purposes only and is not intended as an investment analysis or recommendation to sell or buy commodities. Tavex is not responsible for any decisions made based on this information. Investing is associated with opportunities and risks, and the market value of commodities can both increase and decrease. Past or future yields on the commodities and financial ratios shown above do not represent a promise or an indication of future earnings.

 

You might also like to read