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The price of silver has dropped back towards the $25.00 level as precious metals continue to suffer due to risk-off sentiment and fears about the economic impact of the new COVID-19 Delta variant.
Silver appears to be more vulnerable to further losses this week than gold as the shiny metal is found in a number of material and industrial goods which could suffer from a lack of demand if global economic activity is hurt again.
If we look at the price behaviour of silver during the start of the COVID-19 pandemic, silver actually crashed in the initial stages and then recovered as the FED announced another QE programme.
The very fact that the price of gold is slipping back towards the $1,800 level is also weighing on the price of silver as both metals share a close price correlation, with gold of course being the leader of the two metals.
Something that is concerning me now is silver’s technicals. While the long-term technicals still looking good, the short-term technicals, however, look particularly bearish as a head and shoulder pattern looms over the metal.
The ActivTrader Market Sentiment tool showed some 85 percent of trader hold a bullish sentiment bias towards silver. This highlights that those traders remain in a stage disbelief as silver prices fall.
Traders have remained rigid in their view that silver prices are rising, no matter what over recent months. The high sentiment levels towards silver have been major concern to me for some time.
Silver short-term Technical Analysis
The short-term technicals for silver show that a breakout from a bearish head and shoulders pattern is taking place, as the metal falls under the neckline of the pattern, around $25.50.
According to the overall size of the mentioned pattern traders should prepare themselves for a $2.00 point price drop if the pattern is successfully activated to the downside.
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Silver Medium-term Technical Analysis
The daily time frame shows that the price of silver has lost its 200-day moving average, around $26.00. This is worrying as bears have failed to rally away from this key metric is a concern.
Silver is also sitting around the bottom of a large triangle shaped pattern. The pattern holds a downside projection of around $4.00, making this a key moment for silver.
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