Silver price reached the expected target of $22.25 per ounce on Tuesday, and bounced back strongly to test the resistance line around $22.60, according to a technical analysis by Economies.com. The rebound was accompanied by a loss of positive momentum in the stochastic indicator, which could signal a potential resumption of the bearish trend in the near term.
Silver price outlook depends on breaking key levels
The analysis suggested that the silver price outlook would depend on the ability of the price to break either the resistance level of $23 or the support level of $22.25. A breach of the resistance level would indicate a reversal of the bearish trend and open the way for further gains towards $23.05 and $24 as the next main targets. On the other hand, a break below the support level would confirm the continuation of the downtrend and target $21.75 and $21 as the next main stations.
Silver price affected by global factors
The silver price movement is also influenced by various global factors, such as the US dollar performance, inflation expectations, industrial demand, and geopolitical tensions. The US dollar index, which measures the greenback against a basket of major currencies, rose to a six-week high on Tuesday, as investors awaited more clues from the Federal Reserve on its tapering plans and interest rate outlook. A stronger dollar tends to weigh on the silver price, as it makes it more expensive for holders of other currencies.
Inflation expectations, which reflect the market’s anticipation of future price changes, also affect the silver price, as it is considered a hedge against inflation. Higher inflation expectations tend to boost the silver price, as it preserves its purchasing power. However, inflation expectations have eased recently, as some central banks signaled their readiness to tighten their monetary policies in response to rising inflation pressures.
Industrial demand, which accounts for about half of the silver consumption, also plays a role in determining the silver price direction. Silver is widely used in various sectors, such as electronics, solar panels, medical devices, and automobiles. Higher industrial demand tends to support the silver price, as it reflects stronger economic activity and growth prospects. However, industrial demand may face some headwinds from supply chain disruptions, labor shortages, and rising production costs amid the COVID-19 pandemic.
Geopolitical tensions, which create uncertainty and risk aversion in the markets, also have an impact on the silver price behavior. Silver is often seen as a safe-haven asset that attracts investors in times of turmoil and crisis. Higher geopolitical tensions tend to lift the silver price, as it reflects increased demand for safety and security. However, geopolitical tensions may also pose some risks for the silver supply chain, as some major silver-producing countries may face political instability or conflict.
Silver price forecast for 2023
Looking ahead to 2023, some analysts have different views on the silver price outlook. The World Bank expects the silver price to be stable at $21 per ounce in 2023 and 2024, essentially the same value it projected a year earlier. Bank of America was more bullish, expecting the precious metal to rise to $23 in 2023 and $24 in 2024. Capital Economics was even more optimistic, forecasting the silver price to reach $28 in 2023 and $30 in 2024.
The divergent forecasts reflect the uncertainty and volatility that surround the silver market, as it is influenced by many factors that are hard to predict. Therefore, investors should be cautious and flexible when trading silver, and monitor closely the developments that may affect its price movement.