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Technical and fundamental analysis for Silver – May 2022

Published by Karl Martin Karus in category Technical & Fundamental analysis on 05.05.2022
Gold price (XAU-SEK)
18 377,41 SEK/oz
  
- 67,92 SEK
Silver price (XAG-SEK)
213,26 SEK/oz
  
- 0,20 SEK

Fundamental Analysis

Hedge funds become bearish on gold and silver

The Federal Reserve’s impending interest rate hike, which has driven the U.S. dollar to a nearly 20-year high, is prompting gold investors to reduce their bullish positioning, according to the latest trade data from the Commodity Futures Trading Commission.

Analysts have noted that the Federal Reserve’s plan to tighten its monetary policy aggressively to address the growing inflation threat is a significant headwind for gold.

Along with gold, silver is also struggling

Silver is also hurting as hedge funds respond to the Federal Reserve’s expected rate rise.

Base metals are being weighed down by the mounting possibility of a worldwide economic recession. Silver is not only suffering as a monetary metal, but it is also seeing a drop in industrial demand. According to research released last week, hedge funds have significantly reduced their exposure to copper. According to analysts, China’s economy is faltering due to COVID-19 restrictions.

Given the long-term nature of high food and energy costs and the fact that inflation is deeply embedded in the economy, the U.S. central bank is likely to maintain its hawkish policy signals. This means that any price rallies, such as the one over the previous few days, may be short-lived, and long liquidations may remain the norm well into the second half of the year,” according to T.D. Securities analysts.

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)

You can check more interactive graphs from our Tradingview account.

  • Silver has bearish pressure from both the long-term and the short-term bearish trendlines.
  • Another bearish indicator is that the silver price is trading strongly below 250MA.
  • The silver price must not close below the 21.43 area to keep the silver price over 20 USD. If that level is broken, we can expect the silver price to fall back to around 18.2 USD

The Gartley pattern, Moving Averages, and RSI

(Picture 2. – Garterly pattern, moving averages, and RSI)

  • Similarly, the Gartley pattern has formed in the silver graph like gold.
  • Gartley pattern near the support area indicates a bullish movement.
  • Similarly, like gold, there is a divergence between the silver price graph and the silver RSI graph. The difference is not as distinctive as it was on the gold graph. Nevertheless, divergence is present and indicates a potential bullish movement.
  • Fundamental analysis and some technical indicators show clear bearish sentiment. There are also solid bullish indications. What is likely to happen in this “in-between” situation?
  • The most likely scenario is a bullish silver price correction around the 250MA area and a sharp drop to test the 21.43-22 USD support area.

In conclusion, there are “mixed feelings” in the market, and one must keep an eye on price action and near-coming support areas to make educated price speculation.


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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