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The price of silver is starting to pullback after gold suffered its first big rejection from the $1,900 level, following the yellow-metals recent run towards the $1,912 level this week, which marked four-month trading high for the ever-popular metal.
Traders have been increasingly shunning silver, often referred to as the shiny metal. However, silver prices have advanced by 6.5 percent since April 1st, making the metal increasingly interesting in a high inflationary environment, amidst record spending and money printing from the United States.
It is noteworthy that silver back exchange traded products remain close to record levels, while data from the CME futures market shows that traders and investors are still expecting more gains ahead for the metal.
UK based research firm Metal Focus noted this week that they expect silver prices to outperform gold through 2021. Traders have been paying close attention to the gold to silver ratio as it rallies from a multi-year low.
Metals Focus also stated that silver prices have lagged copper price over recent weeks, as the red metal advanced to $10,000 per tonne. MF analysts argued that silver could be a better bet than copper due to its favourable industrial demand and investment demand, which betters copper at this juncture.
Fiscal spending from the Biden administration could be the key consideration for silver bulls again this year. Silver failed to rally on report that the Biden administration has laid out a $6 trillion fiscal budget. However, the market may be slow to react, and it may be a case of sell the rumour and buy the fact here.
According to the ActivTrader Market Sentiment tool the bullish sentiment bias towards silver continues to grow, with 83 percent of traders still predicting further upside. For me, the sentiment extreme is too large, and I think we may need to see it dropping before silver can rally again.
Silver short-term Technical Analysis
The short-term technicals for silver show that an inverted head and shoulders pattern has been activated, however bulls have been unable to keep the price above neckline support, around the $28.30 resistance zone.
The size of the pattern implies that a move of close to $5.00 could take place, with the $33.30 level the short-term target. I believe that silver may have to have to go towards the $27.00 to $26.00 area before the expected explosive price move takes hold.
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Silver Medium-term Technical Analysis
The daily time frame shows that a huge, inverted head and shoulders pattern will be activated once silver crosses the $30.00 level. The size of the pattern implies that silver could be headed towards the $39.00 to $40.00 level.
Fibonacci analysis shows that the 61.8 percent Fibonacci retracement of the 2020 low to the all-time price high is found around the $35.00 level. This would be my first price target, with the 78.6 Fibonacci retracement my next target, at $42.00.
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