Like most other metal markets, silver prices started Monday with a noticeable decline. At the same time, the extent of said decline was not as severe as it was last week. The absence of another testing of the 30.5 level shows that most market participants are in the mood for buying, which is confirmed by the gradual recovery of the price to the closing levels of Friday’s trading session. A quick buyback of the drawdown will help silver to return to 32.2 and recent highs.
The surge of negativity in commodity markets was fueled by news from China. Over the weekend, officials in China held a press conference, where they spoke about new measures to stimulate the national economy. Analysts perceived these statements with skepticism, especially on the background of statistics showed increased deflation on Sunday. Industrial metals have once again come under the selling pressure, but even in such conditions silver shows one of the best results.
According to Metals Focus experts, the reason for this is the growing deficit of the white metal on the market. Even if the increase in demand for silver is smaller than expected due to a slowdown in the global economy, prices will be supported by the shrinking supply. Production of the white metal has already decreased by 7% since the record high of 2016, and the trend shows no signs of reversing. More than 70% of silver is mined as a co-product at copper, lead and zinc projects, making it extremely difficult to solely increase its output.
According to Finbold analysts’ estimates, silver has potential to rise up to $50 per ounce. For this, prices need to return to the level of 32.5 and consolidate above it. Renewal of 12-year highs is a very strong factor encouraging investors to buy the white metal. Despite the problems of the Chinese industry, silver keeps getting support from geopolitical tensions and cycles of interest rate cuts by global central banks.
The Stochastic indicator on the daily silver chart gave a buy signal, confirming a new wave of growth. The nearest target for the bulls is the 32.2 mark, after which the way to the top of early October, located just below the 33 level, will be opened.
The following trading strategy can be suggested:
Buy silver at the current price. Take profit – 32.2. Stop loss – 30.5.
