Silver price drops past critical level; where to next?

Silver price has been in the red for five consecutive sessions amid a strong US dollar. It has begun the new week by extending last week’s losses; trading below the critical level of $24.00 for the first time since 25^th February. Indeed, since Russia invaded Ukraine on 24^th February, the aforementioned level has offered steady support to the precious metal as demand for safe havens surged.

However, prospects of aggressive rate hikes have continued to offset the precious metal’s safe-haven appeal. The market has already priced in a rate increase of a half-percentage point during the Fed’s next meeting in May.Furthermore, there are higher bets that the US central bank will be even more aggressive in hiking rates in the course of the year.

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Subsequently, the US dollar has continued to strengthen while weighing on silver price. At the time of writing, the dollar index was at $101.60. Earlier on Monday, it has extended its gains to $101.75, its highest level since March 2020.  

Besides, silver price is also reacting to the decline in Chinese demand. In addition to being a precious metal, silver is also an industrial metal with uses in the manufacturing and electrical subsectors. With China as the leading consumer of industrial metals in the world, the ongoing COVID-19 lockdowns have heightened demand concerns for metals like silver, copper, and iron ore. Copper price has dropped to a six-week low of $4.47 per pound.

Silver price technical forecast

Silver price has extended last week losses; trading below the crucial support zone of 24.00 for the first time in about two months. On a daily chart, it is below the 25 and 50-day exponential moving averages. Based on both the fundamentals and technicals, I expect the precious metal to remain under pressure as the week unfolds.

Even with the plunge, 24.00 will remain a crucial level to watch out for in the new week. In the short term, I expect silver price to hover around 23.71 as the bulls gather enough momentum to retest the aforementioned level. On the flip side, further decline may have the precious metal find support at 23.32.