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Silver is another victim of protests in China

The start of the new week was not the best for precious metals. Silver's volatility is above 3,5%. Covid protests in China bring uncertainty into markets.

Protest in China affects markets

The current market development from the start of the week does not favor precious metals. The stronger US dollar and the situation with anti Covid protests in China negatively affect the market stability. Protests raise throughout the country and zero-covid restrictions and lockdown policy are the main cause. With a stronger US dollar, the prices of precious metals head down. Gold’s volatility on Monday is more than 1.50% and silver’s daily volatility is 3.62%. 

Read more: USD/JPY plunges after Chinese protests

The Moodix Market Sentiment shows -0.13 points, which shows that sentiment is slightly negative. Markets are nervous about the situation in China and investors are closely watching the development of one of the biggest protest since the 80s. 

Silver tests support levels

Today, silver fell to the level of $21 (futures contracts), specifically $21.040. This level is extremely important not just from the price development, but from the volume as well. From the longer, D1 time range, we can see that the price of silver persists in the uptrend and above 200 EMA. But current development checks this strong indicator as the support. 

The daily chart of SI (Silver Futures), 200 Exponential Moving Average. Source: Author's analysis

The daily chart of SI (Silver Futures), 200 Exponential Moving Average. Source: Author’s analysis

Volume confirms price level

The current price development is confirmed by volume indicators as well. The volume-weighted average price on a monthly basis shows a support level of $21.151. It represents developing monthly VWAP (yellow solid line). This price of precious metal has worked with this line several times. Those reactions are highlighted by white arrows. The resistance could be around $21.700 which is the highest volume of the month and the 10 weeks high. 

30 minutes chart of SI (Silver Futures), Monthly VWAP support. Source: Author's analysis

30 minutes chart of SI (Silver Futures), Monthly VWAP support. Source: Author’s analysis

The next support could be around the level of $20.800. It consists of several pivot lows which are accumulated in that area (red lines). From the other side, accumulated pivot highs (blue lines) are located around $21.880. So the pivot highs and the highest accumulated volume of the months from the previous chart affirm a possible resistance level in the area of $21.700 – $21.880.

30 minutes chart of SI (Silver Futures), Pivot highs, and pivot lows. Source: Author's analysis

30 minutes chart of SI (Silver Futures), Pivot highs, and pivot lows. Source: Author’s analysis

Daily market profile 

On an intraday basis, the daily market profile shows a support level right at $21.035. A break under this level and its confirmation can open the door to the support of $20.800, mentioned above. 

30 minutes chart of SI, Daily market volume profile. Source: Author's analysis

30 minutes chart of SI, Daily market volume profile. Source: Author’s analysis

The persistence of the trend 

Volume analysis shows that despite the fact that silver is in the uptrend in a long time range, the current situation in China with a stronger US dollar can throw away all the effort. Very important is the next development of the zero covid protests and the US dollar, which works as the safe haven in the moment of any sign of instability in the USA’s biggest trade partner. 

Tomas is a professional trader and money manager on foreign exchange market from 2014. His main domain are commodities. Experiences gained due this period are transformed to consul...

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