Silver Price Prediction: Selling Momentum Persists On Widespread Recession Fears

Summary:
• Silver price registers the largest single-day loss since February 2021 as investors opt to take profit on larger global market downturn.

Silver price dropped further on Monday as concerns mounted over the trajectory of the US economy. XAGUSD was down by 7.1 percent at press time, its largest single-day loss since February 2021, to trade at $26.58 at the spot market. The loss underlines a widespread bearish sentiment across markets, with fears over potential US recession driving mass profit-taking in asset markets. Gold prices were down by 2.4 percent at the time of writing on strong selling pressure.

What is driving down silver prices?

Last Friday, the US economy reported less-than-expected Non-Farm Payroll numbers and a rise in unemployment rate in July. In view of the Fed’s decision against an interest rate cut in August, there are fears that the damage would already have been done by the time an expected 25 basis points cut is announced in September.

As a recession in the US would have far-reaching consequences across the globe, many investors have chosen to cash in when they are still holding profitable positions. Also, China’s economy already indicated signs of a slowdown, with stagnating PMI figures in the last two months.

US markets declined sharply last week, with both the Dow Jones Industrial Average Index and the Nasdaq 100 down by 2.1. Meanwhile, the FTSE 100 was down by 3.5 percent, while the Nikkei closed the day worse off, having shed 12.4 percent of its value. The resulting sentiment has precipitated Fear Uncertainty and Doubt (FUD) confidence around most assets’ performance in the mid-term, with silver’s use as an industrial metal exposing it to greater erosion.

Momentum indicators

On the 4-hour chart, the momentum on silver price favours the continuation of the downside. The price has already broken below the lower Bollinger Band, signaling control by the sellers. In addition, the RSI is at 34, adding support to the downward momentum.  

Silver price support and resistance levels

Silver price looks headed to the downside, if resistance remains resilient at 27.21. That will likely lead the XAGUSD pair to establish the first support at 26.54, below which a stronger downside momentum could proceed to test 26.00. Conversely, a break above 27.21 will signal that the buyers are in control. That momentum will likely encounter the first resistance at 27.61, but extended control could lead to a move past that barrier, which could invalidate the downside view. Furthermore, it could also propel gains to test the next resistance at 28.12.