Silver prices down 1% amid technical correction following Tuesday’s stunning rally

Spot silver (XAG/USD) bulls perked up a little during Wednesday’s European session morning, taking the precious metal as high as $24.32, but soon ran out of steam and prices have since reverted back towards Wednesday Asia session lows around $23.60. As things stand, spot silver trades with losses of a little more than 1.0% or roughly 24 cents.

Silver bulls take a breather following Tuesday’s rally

No particular news or headlines have been slightly retracement lower on Wednesday; more likely, profit-taking following Tuesday’s more than 6% gains is at play.

Also working against XAG/USD prices; the US dollar is marginally firmer on Wednesday and trading in the 91.30s, up from Wednesday Asia session lows in the 91.10s, although this is mainly being driven by a weaker British pound amid Brexit concerns, rather than any meaningful positive shift in sentiment towards USD.

The bullish argument that accommodative central banks (good for precious metal demand as an inflation hedge) and low real interest rates for the foreseeable future (as inflation picks up during the recovery but central banks keep interest rates low, increasing the attractiveness of precious metals versus fixed income) are likely to continue to provide some support to the precious metals market.

Silver bulls building a foundation above support in the mid-$23.00s?

As was the case during Wednesday’s Asia session, silver prices have again found support in the $23.60s (19 November low). Below that, there are a few more notable areas of support, namely, the 9 November low at $23.57 and the 24 and 25 November highs at just above $23.50.

To the upside, the key levels to watch are silver’s 21 and 50-day moving averages, which coincide with each other almost perfectly at just above the psychological $24.00 level, as well as Wednesday’s highs at $24.32. Above that, a longer-term downtrend linking the 7 August highs at $29.85, the 1 September high as $28.92 and the 8 November high at just above $26.00 is likely to come into play as resistance just ahead of $25.00.

XAG/USD four hour chart