After hitting a record high last week, traders have been cashing out this week, causing silver to fall sharply and now break below the support level of $50.91.
As of press time, the spot price of silver in London is fluctuating below $49 per ounce, after reaching a record high of $54.45 per ounce last Thursday. With the further easing of liquidity tightening, market sentiment towards silver in the short term has turned bearish.
FX Empire analyst James Hyerczyk stated that silver prices may fall towards the 50-day moving average around $43.85. After breaking below the key level of $50.91, silver prices have fallen further, and the market faces greater downside risk.
Hyerczyk points out that a key driver of the recent surge in silver prices was the tightening of liquidity in the London market, when physical supply became scarce, forcing lending rates to soar to record highs. However, this situation has changed in the past week with large quantities of silver being shipped to London from the US and China.
He revealed that traders said approximately 15 to 20 million ounces of silver were airlifted to London, a costly mode of transport typically reserved for gold trading. This large-scale physical inflow alleviated London's physical shortage, thereby reducing spot premiums and short-term borrowing rates.
Short-term bearish, long-term support
Although the supply crisis in the London silver market has temporarily subsided, Hyerczyk points out that physical tensions persist in other markets, which will support silver prices.
He analyzed that China exported 100 to 150 tons of silver last week, but not all of it went to London, England. Due to holiday demand and domestic supply shortages, India, the world's largest silver consumer, is actively buying silver. The silver premium in India has soared to a record high, forcing it to rely more heavily on air freight.
Meanwhile, he stated that silver inventories at the Shanghai Futures Exchange fell by 249 tons to 920 tons last week, marking the largest weekly outflow in 11 years. Furthermore, since the beginning of October, 697 tons of silver have flowed out of Comex warehouses in the United States due to tariff-related uncertainties.
In the long term, the fundamentals for silver remain positive. (Saxo Bank) Ole S. Hansen, head of commodities strategy, said that gold and silver remain in a structural bull market, driven by the repricing of global financial trust.
He emphasized promoting precious metals The factors driving the price increase remain unchanged: weakening global confidence in the existing financial order has led central banks to continue increasing their gold holdings, Western investors are increasing their demand for precious metal ETFs, Chinese households are seeking alternative investments beyond real estate, and Western trust in fiat currencies and fiscal management is gradually waning.
Furthermore, from a technical analysis perspective, historically, when silver experiences a sharp decline, the drop is usually twice that of gold. However, in the recent sell-off, the difference in the decline between gold and silver is not significant, indicating that the rise in silver is relatively stable and sustainable, rather than being excessive speculation.
Hyerczyk also pointed out that people are now focused on the US September Consumer Price Index report to be released on Friday. This will be the first official data since the US government shutdown lasted for several weeks, and it will prompt the Federal Reserve to cut interest rates. A rate cut, in turn, will help stabilize silver prices.
(Article source: CLS)
