Silver continues consolidation around $24.50 within pennant, breakout likely

• Silver prices have been choppy on Wednesday, swinging between gains and losses, and recovering sharply from late European morning lows at $24.20.
• XAG/USD has been consolidating within a pennant structure this month and looks subject to breakout.   

Spot silver prices (XAG/USD) have been choppy on Wednesday, swinging between gains and losses, but have broadly continued to consolidate close to the $24.50 mark, as has been the case most of the time since the start of Tuesday’s US session. The precious metal bounced sharply from fresh weekly lows around $24.20, set around midday London time after Pfizer said its vaccine had actually shown 95% efficacy, and now trades back above its 21-day moving average (DMA) at $24.38 and its 50DMA at $24.62.

A continued gradual softening in USD that has seen the Dollar Index slip from weekly highs above 92.80 to current levels close to 92.30, which has been exacerbated more recently by dovish-tilting FOMC commentary, ought to offer silver some support going forward. On the other hand, recent bouts of vaccine optimism have proven to be XAG/USD negative and may continue to be so going forward.

Silver breakout likely as prices consolidate with tight pennant

Since 3 November, Silver prices have seen considerable volatility but have in recent days shown considerable consolidation. XAG/USD now looks to have former a pennant structure, with prices being squeezed to the downside by an upwards trendline linking the 3, 9, 11 and now 18 November lows and to the upside by a downwards trendline linking the 8, 9, 16 and 18 November highs.

Further contributing to recent consolidation is the fact that silver prices have spent most of the last 36 hours trading between its 21 and 50DMAs at $24.38 and $24.61 respectively.

Such pennants are subject to breakouts, with an upside break being signalled by a move above the 50DMA and $24.60 mark and a downside break being signalled by a move below Wednesday’s lows and the $24.20 mark.

In the downside scenario, the next levels of support in focus will be the 11, 9 then 3 November lows at $23.75, $23.60 and then $23.22 respectively, followed by the October low at $22.60. In the upside break scenario, the levels of resistance in focus will be the psychological $25.00 and accompanying 16 November high, followed by the November high at just above $26.00.

XAG/USD four-hour chart