Silver has experienced a remarkable two-year bull run, recently reaching a 12-year high of $33.71 per ounce on October 19, 2024. This surge has seen silver outperform gold during this period, driven by robust demand and its growing appeal as a store of value.
However, the market is now facing headwinds, entering a significant correction phase following its October peak. This peak marked a higher high within a two-year Channel Up pattern, yet technical indicators now signal the onset of a bearish leg.
Historical comparison: A mirror of the May 2023 trend
Notably, TradingShot highlighted in a recent TradingView post that silver (XAGUSD) is undergoing a strong correction phase resembling its prior bearish cycle early last year.
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According to TradingShot, the current bearish move mirrors the correction initiated on May 5, 2023, which targeted the 200-day moving average and eventually reached the 0.382 Fibonacci retracement level.
During the 2023 decline, silver initially found support at the 50-day moving average before being rejected on June 9, 2023. This rejection solidified the continuation of the downtrend.
A similar scenario appears to be unfolding recently. Silver is currently trading below the 50-day moving average, confirming a bearish short-term outlook. Unless the price decisively closes above this moving average, the bearish momentum is likely to persist.
Key levels to watch
The immediate downside target for silver is $29.50, slightly above the 0.382 Fibonacci retracement level.
This target aligns with an expected convergence between the price action and the 200-day moving average. These levels represent critical support zones that could temporarily halt the ongoing decline.
Adding further weight to the bearish outlook, the 1W MACD recently formed a Bearish Cross, a strong reversal signal. This indicator is particularly noteworthy, as the last Bearish Cross occurred on May 24, 2023, coinciding with a significant price drop.
The current MACD structure confirms that the correction is not merely a short-term retracement but part of a broader bearish trend.
Contrasting perspectives: A bullish wave in the making?
Despite the prevailing bearish signals, some analysts foresee a potential bullish turnaround. Silver Surfer, a renowned silver analyst, noted that silver has transitioned into a bullish phase, breaking out of a descending trendline.
The price action suggests a five-wave impulse pattern, with Wave (v) targeting the $32 to $32.50 range. A breakout above $32.50 could signal a strong continuation of the uptrend, while key support at $30.50 could provide a foundation for recovery.
Broader market dynamics
Silver’s price movement also reflects broader market dynamics. Gold’s rally amid heightened geopolitical tensions has provided tailwinds for silver as a safe-haven asset.
Additionally, speculation surrounding a potential 25-basis-point interest rate cut by the Federal Reserve in December adds complexity to the precious metals market.
As silver’s appeal as both an industrial and safe-haven asset grows, traders remain watchful of geopolitical developments and U.S. economic signals to gauge the next move.
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