FxWirePro: Silver outpaces gold in plunging, both fundamentals and technicals remains fragile for white metal

Silver falls tracking gold but in a more volatile fashion Silver prices tracked gold lower but slumped much more dramatically given its illiquid nature to register a fall of more than 5% on Tuesday, trading at its lowest for three months.

Whereas the price of yellow metal has been steady, had regained some ground on Thursday owing to a weaker U.S. dollar, but the greenback moved back higher on Friday morning.

Technically, major support is at $17.24/oz, the location of the 200-day moving average, which if broken on a closing basis could endanger the uptrend. Bulls rejected at 7DMA, slipping below DMAs.

RSI on daily terms signals strength in declining trend, while failure swings on monthly terms push below EMAs and stochastic oscillator indicates selling momentum has been intensified.

We think that the rapid increase in silver investment will not be sustainable for the rest of the year and that the largest component of physical silver demand, industrial applications, will also continue to fall, which will place further pressure on silver prices.

Furthermore, physical demand from key Asian consumers has remained stubbornly weak this year and trade flows have slowed year-to-date. China’s imports of silver slumped by 36% YoY to 216t in August, taking YTD imports below their year-on-year level for the first time this year.

Among metals trading, silver futures for December delivery added 0.17% to $17.487 a troy ounce.