Short term
Medium term 
Long term (12M): Up
R1 21.13 Jul 2016 high 
R2 22.10 Jul 21 high
R3 22.40 100 DMA
R4 24.90 20 DMA
R5 26.01 40 DMA 
R6 29.85 Aug 7 high

S1 26.20 Jul 28 high
S2 26.01 40 DMA
S3 24.90 20 DMA
S4 22.40 100 DMA
S5 20.76 50% Fibo Mar-Aug rally
S6 19.38 200 DMA

Converged in mid-ground

BB – Bollinger band
COT – commitment of traders 
DMA - daily moving average
ETF – exchange traded funds
HSL – horizontal support line
SL – support line
MACD – moving average convergence divergence
DTL – downtrend line
UTL – uptrend line
H&S – head and shoulder pattern
RSI – relative strength index

  • The spot silver price has seen a muted start so far on Wednesday October 7, reflecting the weaker tone in the dollar and Asia equities following the decision to suspend fiscal aid negotiations until after the November 3 US presidential election.
  • Momentum indicators have softened but are attempting to stabilize; the 40 DMA is poised to cross below the 55 DMA, while the stochastics have crossed lower, although the fastline has flattened. The RSI stands currently at 41.
  • Resistance is seen from the 20 and 40 DMA's at $24.90 per oz and $26.01 per oz ahead of the August 7 high of $29.85 per oz.
  • Downside pressure has been limited by support from the 100 DMA at $22.40 per oz so far, but the small bull-flag that appears to be forming implies downside risks remain. We have a target of $19.30 per oz based on this.
Macro drivers
Recent price strength has encouraged an element of profit-taking among exchange-traded fund (ETF) investors; net holdings in the funds we actively track total 988 million oz, down from the August 24 record of 1,001.9 million oz. Despite this, holdings are up significantly from 683.4 million oz in January.

Net length among Comex speculators totaled 40,730 contracts in the week to September 29, which is neutral overall based on our z-score analysis, having peaked at 105,515 contracts in April 2017, at which point silver was testing around $18.65 per oz.

Demand among retail investors has strengthened. American Eagle coin sales are currently running at a 3.2-million-oz pace so far in October, according to the US Mint; sales in the first nine months of 2020 increased by 57.9% year on year. 

China's latest infrastructure investment push remains supportive for silver demand while authorities expand the nation's renewable energy production capacity. The latest project to enter into operation includes a 2.2 gigawatt (GW) solar plant in the northwestern Chinese province of Qinghai.

Mine production has also been significantly affected and disruptions continue to feature; global production stands down by 7.9% in the first seven months of 2020, according to the World Bureau of Metal Statistics.

While prices continue to consolidate, the current chart setup implies downside risks remain in the short term. 

All trades or trading strategies mentioned in the report are hypothetical, for illustration only and do not constitute trading recommendations.