Silver extended its correction from the recent highs above $24, and we could see even lower prices in the weeks ahead if the U.S. dollar remains strong. The demand for the dollar continues to grow, although it remained below its weekly high of 0.86 compared to the euro.
Fundamental analysis: Fed Chair Jerome Powell said that interest rates could rise quicker than expected
Since the beginning of September, the silver price has weakened more than 5% and reached the price levels that we had seen in November 2020. The U.S. central bank reported on Wednesday it could begin reducing its monthly bond purchases by as soon as November 2021, which positively influenced the U.S. dollar, and the most significant force behind the silver price slide is the appreciation of the U.S. dollar.
“The U.S. central bank is preparing the ground to possibly begin dialing back some of the extraordinary support it has given the economy during the pandemic. The timing and pace of the coming reduction in asset purchases will not be intended to carry a direct signal regarding the timing of interest rate liftoff,” Fed Chair Jerome Powell told reporters on Wednesday.
The U.S. Federal Reserve switched to a more hawkish tone, and Fed Chair Jerome Powell said that interest rates could rise quicker than expected by next year. Jerome Powell also said that Fed achieved its goal on inflation, while more than half of Fed members believe that the economy reached the employment goal.
The global business activity is recovering, the U.S. unemployment rate fell to 5.2% in August, and the rapid price increases are also a reason to begin raising rates. The prospect of interest rate hikes positively influences the U.S. dollar, and those whose interest is to invest in precious metals like Silver should have the U.S. dollar on their “watch list.”
Technical analysis: $20 represents a strong support level
Those whose interest is to invest in commodities like Silver should consider that the risk of further decline is still not over.
The important support level currently stands at $20, and if the price falls below this level, it would be a firm “sell” signal. The next price target could be around $18 or even below.
On the other side, if the price jumps above $25, it would be a signal to trade Silver, and we have the open way to $27.
Summary
Silver price remains under pressure after the U.S. central bank reported that it could begin reducing its monthly bond purchases by as soon as November. The most important driving force behind the price slide is the appreciation of the U.S. dollar, and investors will continue to pay attention to the U.S. Federal Reserve comments.
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