Is Silver Breaking Down From Its Trading Range?

For much of the past two years, silver has been trading in a range between its $22 support and $30 resistance as many traders have been waiting for a breakout in one direction or the other. While many commodities have soared in recent years as inflation made a comeback across the globe, silver’s trading action has been unspectacular, which is surprising because it has a long-established reputation as an inflation hedge.

Silver has fallen below its key $22 support level in recent weeks, which is a sign of technical weakness. If silver manages to climb back above the $22 level, it would negate the recent bearish signal and could set the stage for a rebound. If silver remains below $22, however, it would put the $20 support level into play. If silver manages to eventually break below the $20 support level, it would likely portend even further weakness ahead.

The longer-term silver chart shows the $22 to $30 trading range and the $20 support level that goes all the way back to 2008 (that level is significant due to the number of times that silver has bounced off of it):

Silver and many other asset prices have fallen in recent months as global central banks hike interest rates and pursue other forms of monetary tightening in order to rein in inflation. If inflation remains persistent, central banks will continue to tighten their monetary policies in an aggressive manner, which could put further pressure on silver in the shorter-term. In the longer-term, however, I am a strong believer in physical silver as an investment due to my belief that the global economy is addicted to monetary stimulus (i.e., low interest rates and “money printing”), which will ultimately lead to much higher silver prices as central banks are inevitably forced to pump liquidity into the global economy once again.

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