Silver is still range-bound despite bullish fundamentals

Silver (XAG/USD) price is trading in a range within an even wider range that dates back to 2020. Whilst the precious metal’s fundamentals look bright for 2024, Silver price is still very much in a straight jacket from a technical perspective. 

Silver versus US Dollar: Weekly chart

The broader range starts from the 2020 highs at close to $30.00 an ounce, and the 2022 lows at around $17.50. Within that, Silver has more recently been oscillating within another narrower range caught between roughly $26.00 and $20.00 (thick black lines). 

Silver’s bullish fundamentals are based on its dual role as both an industrial metal and a store of value. 

As an industrial metal Silver is likely to see increased demand from improved global growth prospects. As a store of value, Silver is likely to see increased demand due to inflation and interest rates falling. 

The Silver Institute, a not-for-profit association, forecasts global Silver demand reaching 1.2 billion ounces in 2024, hitting its second-highest level on record.

Silver Price: Technical missrepresentation 

Silver’s technicals do not closely mirror its long-term bullish fundamentals – for them to do so, Silver price would have to break out of the ranges it is currently stuck in. 

To begin with it will need to break out of the smaller range. Assuming a breakout above the top of the range at $26.00, XAG/USD will likely rise as far as the height of the range extended from the breakout point higher, or a Fibonacci ratio of the height. 

This could see Silver rally to just shy of $32.00, or the $29.50s if using the 0.618 Fibonacci ratio of the range. 

In order to avoid being caught in a false break investors should make sure the break above $26.00 is decisive. This means it should be accompanied by a longer-than-average daily bullish candlestick which closes near its high, or three up days that pierce cleanly above the resistance level. 

The same would be true of the breakout of the wider range. 

If the technical picture turns bearish, however, a decisive break below the $20.00 level would be expected lead to a sharp move down to the wider range lows at $16.00 and possibly lower.