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Technical and fundamental analysis for Silver – February 2022

Published by Karl Martin Karus in category Technical & Fundamental analysis on 01.02.2022
Gold price (XAU-SEK)
18 385,34 SEK/oz
  
- 125,40 SEK
Silver price (XAG-SEK)
213,32 SEK/oz
  
- 0,90 SEK

Fundamental analysis

In terms of commodities, silver has lived in gold’s shadow and, more often than not, moved in correlation with gold prices.

Silver is starting to live a ” life of its own ” as the global economy is transitioning to renewable energy and carbon-free power.

According to Statista, silver production in 2020 amounted to 784.4 million ounces while demand was 896.1 million ounces. There is a growing demand for silver, especially when considering the green narrative.

Silver straddles two worlds of value. Both an industrial metal and fungible commodity, silver gains serious traction in a digital world in need of affordable risk-off assets

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 – Trendlines / Support & Resistance)

  • Like gold, silver price action has also formed a triangle wedge, indicating an upcoming breakout – the thinner the wedge gets, the higher the probability.
  • Silver price is currently trading near a strong long-term bullish trendline.
  • Silver price is currently trading in the support area.
  • According to support and trendlines, we can see that silver price is trading near a very strong support area. There is a high potential for a spike up to around 24.55 USD per ounce.
  • We can expect a very bearish silver market when the long-term trendline and support area around 21.44 USD are broken.

Moving Averages


(Picture 2. – Moving Averages & RSI)

  • In picture 1. There is an asymmetrical red line – this is a 250-day moving average.
  • 250 Moving Average is the yearly moving average (weekends excluded)
  • Silver price is currently trading under 250-MA, which indicates a bearish market.
  • Since the trendline and support level are strong, there is a potential for silver bulls to spike the price up near the 250MA line to test the market strength.

RSI divergence

  • RSI is currently not oversold nor overbought.
  • There is a divergence between the RSI indicator and the silver price graph.
  • The RSI indicator suggests that the silver price could potentially spike up to test the 250MA line.
  • Since the RSI indicator is not in the overbought or oversold area, the current divergence is not considered a strong price spike indication.

We can expect a mid-term bearish market when the silver price tests and breaks under 21.44 USD per ounce. However, when the silver price corrects and spikes up to 24.55 USD area, we must look for a further breakout above 24.55 USD resistance line/downtrend line and 250MA. When silver breaks above from all those three indicators, it is expected to see a strong bullish silver market.


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.

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