Silver price fell for the second session on Tuesday as it traded at $27.07 per ounce, after losing 0.45 per cent in intraday trading. The commodity seems to be following the footprints of its richer cousin, gold, which has also lost steam in the last two days as safe haven appetite reduces. XAGUSD is down by 5.82% in the last two trading sessions, underlining shifting priorities among investors as geopolitical temperatures cool down.
At its current price, silver trades near three-week lows, a major reversal for a commodity that was on an uptrend three sessions ago. The calming of hostilities between Israel and Iran adds to the downward pressure on the commodity. While gold is the primary precious metal used as a hedge in high-risk environments, a significant number of investors also use silver to diversify their portfolio.
That said, silver is not only a precious metal, but also a key material in industrial manufacturing and processing. This gives it an alternative market when the demand for safe haven assets declines. Therefore, the US manufacturing PMI figures set for release on Tuesday will provide further guidance on the direction likely to be followed by silver prices. Also, industrial activities in China rose for the first time in six months in March, signaling a strong demand outlook.
However, despite the demand outlook, a strong US dollar presents a key limitation to silver’s upside. A stronger dollar makes it more expensive to buy silver using other currencies, hence reduces demand. The DXY index stands above 106.00 as of this writing, signifying the greenback’s strong position despite a marginal decline this week.
Technical analysis
Silver price faces resistance at 27.10, and the sellers will be in control as long as action remains below that level. The seller-controlled market could break the support at 26.85 and possibly test 26.67 in extension. Alternatively, a move above 27.10 will favour the buyers to be in control. A continuation of the upward momentum will likely break the resistance at 27.29 and invalidate the downside narrative. Furthermore, silver price could then head higher to test 27.52 in extension.
