In our view, the ideal way to trade in this commodity is to simply look for pullbacks. It will give plenty of opportunity to buy at a cheaper value for a longer term.
In the last couple of weeks, silver prices have recovered by almost 20 percent after seeing poor performance in March. The price of silver, in March, hit their lowest since 2009. It closed 15 percent lower as compared to February amidst a lot of volatility, casting a shadow over the metal’s ability to act as a safe-haven.
If we look at silver's price chart for March, the metal traded around $16 per troy ounce at the beginning of the month. The prices were in the positive in the first week of March; however, a sudden downfall in the middle of the month pushed the rates down to $11.60.
On March 18, silver was at its lowest since April 2009. The prices traded sideways for the remainder of the month. At the end of March, silver was down by 15 percent month-on-month.
Silver's dismal performance in March can be attributed to the coronavirus-driven lockdown as it is an industrial metal. Its worthiness as a safe haven has seen a hit due to this. On the other hand, gold has performed better proving its mettle as the safest of investments.
In April, the supply of silver will take a hit as Mexico, which is responsible for about 23 percent of the world's silver production, will likely keep its mines shut due to the coronavirus. The reduction in the supply of the metal will somewhat be proportionate to the fall in demand. However, what remains to be seen is whether a dip in the supply would lead to a rise in its prices.
Perhaps silver has already seen the worst in March and investors may get optimistic and see a silver lining there.
On the technical side, silver is stuck in a fairly tight trading range and we can see indecisiveness in the market. The silver prices rose to $15.90 on March 13 which was its highest for the month, and then suddenly dipped to $11.60 on March 18.
RSI suggested that the metal was oversold and MACD gave a buy signal about a week ago. The metal rose again within the next few trading sessions and made a high up to $14.70 on March 25.
We feel $13.15 would be ideal support for silver in recent conditions.
Silver futures, in the previous week, pulled back slightly above $15.00 and at that point of time, markets showed a significant buying pressure.
On the basis of these choppy movements in silver we feel that prices touch $16.50. But there would be a massive selling pressure with a tight resistance around $17.50.
In our view, the ideal way to trade in this commodity is to simply look for pullbacks. It will give plenty of opportunity to buy at a cheaper value for a longer term. However, a word of caution would be to keep the leverage low, as investors may get hurt by the volatility that the market is witnessing.
The author is Head of Research at CapitalVia Global Research Limited- Investment Advisor.Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.