Silver has rallied by more than 6 percent from the lows of the week as precious metals start to catch a serious bid after the recent Fed rate decision left markets with the impression that the pace of rate hikes could be slowing.
Precious metals have been in a downtrend due to the fact that financial markets believe that the Fed will continue to aggressively hike interest rates. Hence there was no real reason to be bullish towards metals such as silver in such an environment.
Due to the Fed’s comments it is possible that the Fed start to pivot toward a slower pace of rate hikes, which in theory should benefit gold and silver at the expense of the U.S. dollar and Treasury yields.
Short covering among money managers who had gone net short on gold for the first time since 2019 could also be a reason why we are seeing such an explosive rally in precious metals.
The technicals for silver are very good if bulls can rally the price above $20.00. This is a very technical level because the short-term trend will officially turn bullish above the $20.00 level.
Current sentiment metric towards silver show that traders remain overly bullish towards the price of silver. The ActivTrader market sentiment tool shows that 88 percent of traders are bullish towards silver.
With this one-way sentiment bias it is not bullish for silver price as retail are heavily leaning on the buy side. However, it could be that money managers are driving the move higher and not retail.
Silver short-term Technical Analysis
The short-term technicals for the shiny-metal shows that a huge explosive price move has happened from an inverted head and shoulders pattern has taken place, and that silver is going to turn bullish above $20.00.
Looking more closely at the neckline break, we could probably expect more upside towards the $20.50 area. If silver price break $18.50 then more downside towards $17.70 should be expected.
Silver Medium-term Technical Analysis
The daily chart shows that silver only turns technically bullish above $22.50. However, bulls have some work to do with a large and very key triangle pattern in the interim.
The clearly visible triangle pattern breakout on the daily time frame indicates that we should probably expect a retest towards the bottom of the pattern around the $21.00 level at some point.