With the psychological support level positioned at 23, the current price rests perilously close to this threshold, ready to move of to the next support level at the Fibonacci 38% retracement point of 22.286. We’re witnessing an interesting confluence, with volume accumulation coinciding with the 23 price level; a distinct marker highlighting the struggle between bullish and bearish sentiments.
Indeed, the market seems to be engaged in an intense test of this level, accentuated by the 50 and 200-day moving averages that underline a bearish climate. The RSI, currently entrenched in oversold territory, indicates the severity of the sell-off, yet the momentum indicator stubbornly stays bearish, hinting at further possible downside. The volume area low as per the volume profile suggests that market players are yet to reach a consensus, further complicated by the pullback from the trendline resistance at 22.645. This indicates the potential emergence of a short-term bullish sentiment, but it needs to be tempered with caution in light of the longer-term bearish trend. Silver has depreciated by a substantial -13.4% from the peak in May 2023, corresponding to a drop of almost -3.5$.
To add another layer of complexity, global macroeconomic conditions influence the trajectory of silver prices. Short-term futures traders have driven prices downward due to a combination of profit-taking and weak long liquidation, resulting in a sharp selloff. In addition, an exhaustive bullish momentum has surrendered to factors such as global economic uncertainty, the ongoing debt ceiling debate in the U.S., a looming default deadline, and a potential banking crisis. Not to mention the surge in the U.S. dollar momentum, which also put downward pressure on silver prices, as it led to profit-taking by firms previously short on the dollar.
Recession fears are another significant factor causing silver to significantly underperform gold. Given that more than 50% of silver demand originates from industrial applications, any signs of global economic weakness could notably impact silver demand. If the U.S. does enter a recession, it will likely exacerbate this effect. Lastly, disappointing economic data out of China, leading to a severe breakdown in copper prices, might be casting a gloomy shadow over silver prices, owing to the established correlations between different commodities.
Despite these bearish factors, a potential short-term correction could be on the horizon. The price could test the 50 MA resistance at the 23.340 level before descending further. However, any bullish movement could merely be a corrective response in light of the RSI trend. Still, with the enduring Fibonacci and volume confluences, the market seems poised for 3 possible moves, one is a short-term bullish move, or a strong downtrend, or a range between the 23.760 resistance at the 61.8% Fibonacci level and the 23 level at the 50% Fibonacci level. All these factors require a cautious and analytical approach, looking for both macro and technical clues, to navigate the silver market in May effectively.