Silver retraced on Friday after a skyrocket movement yesterday which increased the price of white metal by more than $1 to over $20.90 an ounce amid deteriorating situation in Iraq that spurred need for safe heaven investment. The sentiment remains bullish due to Higher Low in the recent correction phase.
As of this writing, the precious metal is being traded near $20.63 an ounce. A hurdle can be seen around $20.86, the 50% fib level ahead of $22.00, the 76.4% fib level and then $23.07, the swing high of the last major rally as demonstrated in the following chart.
On the upside, the white metal is expected to find a support around $20.34, the 38.2% fib level before $20.00, the 100 Simple Moving Average (SMA) and psychological number and then $19.70 which is the 23.6% fib level.
The fighters of ISIS entered a suburb of Iraq’s capital Baghdad yesterday; increasing possibility of the US backed foreign intervention which could escalate the ongoing crisis. Investors tend to buy gold and silver in crisis era as safe heaven investment. Moreover, the participation of US in Iraq will also be seen as bearish for the US Dollar (USD) consequently adding to the bullish momentum in Silver. So fundamentally there are many reasons to be bullish on Silver.
US Monetary Policy
The US Federal Reserve recently announced another cut in the monthly asset purchase program by $10 billion to $35 billion but the US dollar failed to show considerable upside movement following the monetary policy announcement which means that tapering is not a major concerns for the investors anymore.
Buying the precious metal on dips still appears to be a good strategy; the $20.00 support area could provide a good buying opportunity in the short term as per technical analysis.