Silver prices remain under significant downside pressure due to the Federal Reserve’s imminent move to raise interest rates by 50 basis points this week, and the potential for further aggressive action from the US central bank.
Analysts at UBS expect to see lower silver prices in the near-term which is a concern, the demand on May and June silver futures contracts also provides a compelling case for further downside.
Interestingly, the Swiss investment bank is negative on silver as the Federal Reserve tries to get inflation under control by aggressively raising interest rates. They added that interest rates have room to move much higher through 2022.
UBS strategist recently said in a report “Prospects of higher interest rates are likely to remain a headwind for the metal,” said. “A silver price whose upside is likely to be capped gives investors the opportunity to engage in more active strategies.”
Current sentiment metric towards silver show that traders remain overly bullish towards the price of silver. The ActivTrader market sentiment tool shows that 89 percent of traders are bullish towards silver.
With this strong way sentiment bias it is not bullish for silver price as retail have gone crazy on the buy side, and not for the first time, which could hint at more steep correction for silver price ahead.
Silver short-term Technical Analysis
The short-term technicals for the shiny-metal shows that a technical meltdown appears to be underway, following a former breakout from rising trendline and a bearish double-top price pattern.
Looking at a possible head and shoulders pattern on four-hour price chart, a coming price correction towards the towards neckline seems likely, towards the $22.00 support area.
Silver Medium-term Technical Analysis
The daily chart shows that silver only remains a strong buy while trading above the $25.00 level, which is the location of the 200-day moving average of the shiny-metal.
I would expect that the price of silver could hit $20.00 if its losses the $22.00 level. If not, we should probably expect a retest of the $25.00 resistance level at some point, but the wedge pattern does favour more downside.