Silver hits key support in downside extension
|- Bears have taken on the key daily support area in an extension of the sell-off.
- Optimism for global economic rebound underpinning upside bias.
Silver is trading at $26.0175 at the time of writing, up some 3.2% having travelled between a low of $25.9030 and $26.9315 on the day.
The failed squeeze has seen the price fall back into the hands of the bears and back to test the mid-Jan resistance structure.
However, silver’s recent price turbulence is part and parcel of the silver market, and will probably happen again.
From the purest of fundamentals for the precious markets, analysts at TD securities had this to say:
''Rather than inferring that gold prices are cheap relative to reflationary assets, we instead argue that gold has reverted to a safe-haven asset. This regime was kicked-off by a rise in rates volatility, fueled by the Fed's passive approach to containing a steeper yield curve.''
''In this environment, real rates are being driven by nominal rates rather than inflation expectations, leaving gold bugs more vulnerable to a rise in real rates while also tying investment demand to lower nominal rates, which doesn't bode well for investment flows in the near-term.''
Meanwhile, China's economy is a crucial implication for the white metal due to the industrial demand for silver.
The JP Morgan global PMI index has been indicating expansion in activity with growth was led by strong and accelerated increases in output and exports in China and the US.
A continued rebound in industrial activity is expected to support the silver price with the likes of infrastructure projects that continue to make progress, supported by the covid-19 stimulus policy.
Fitch forecasts sharp recovery in the global demand for metals
Additionally, Fitch says prices will be supported by the broader and deeper global economic recovery as covid-19 vaccines are made available.
Access to vaccines will also help reduce the disruptions to operations seen in 2020 in multiple key mining countries such as Peru and South Africa.
As overall prices, production and consumption of mineral and metals improve in 2021, ''the outlook for miners and metal producers is positive for next year,'' Fitch maintains.
Daily chart
The price is expected to remain trapped between support and resistance at this juncture while it holds above a weekly dynamic support:
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