Silver prices currently remain relatively flat as risk-on sentiment prevails, dampening the demand for Silver, Gold, and other safe-haven assets which benefited off of the global Coronavirus pandemic last year. Although the precious metal has lagged behind its Gold counterpart, recent trends suggest that Silver is becoming increasingly popular as a viable asset.

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With the rollout of the Covid-19 vaccine globally, renewed optimism has driven demand for Emerging Market (EM) currencies while the US Dollar continues to slide, making precious metals cheaper for other economies using other currencies.

Meanwhile Platinum, the major commodity commonly used in the auto motor industry to reduce emissions, has retraced from yesterday’s advance as supply shortfalls combined with expectations of a rebound in motor sales pushed prices to fresh six-year highs.

SILVER (XAG/USD) PRICE ACTION

For now, XAG/USD remains rangebound, with the key psychological level of 2800 currently providing resistance for Silver bulls. After buyers failed to break above 3000 at the beginning of the month, bears managed to pull prices back within the confluent zone, between the key Fibonacci retracement levels of the historical move (2008 – 2011), with the 50% retracement forming as additional resistance at 2906.2 while support rests at the 61.8% Fibonacci retracement level of 2416.9.

Silver (XAG/USD) Daily Chart

Chart prepared by Tammy Da Costa, IG

Currently, the Moving Average Convergence/Divergence (MACD) remains above the zero line with the Commodity Channel Index (CCI) lingering just below 100.

SILVER (XAG/USD) VOLATILITY

With Silver prices catalyzing off of US Dollar weakness, a shift in implied volatility may be an additional driver for short-term price action, as the VIX, also known as the ‘fear index’, often indicates that a change in sentiment is underway.

Relationship between Volatility and Silver Prices

Resource: Refinitiv

SILVER CLIENT SENTIMENT

At the time of writing, retail trader data shows 90.26% of traders are net-long with the ratio of traders long to short at 9.27 to 1. The number of traders net-long is 3.27% higher than yesterday and 0.99% higher from last week, while the number of traders net-short is 5.01% lower than yesterday and 5.01% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Silver prices may continue to fall.

Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger Silver-bearish contrarian trading bias.