The pressure is mounting for silver as prices become increasingly squeezed. Upward pressure from gold and global risks, coupled with downward pressure from negative money supply growth and high rates, are putting silver in a tight spot. The recent change in market expectations regarding the timing of rate cuts, following strong US growth and jobs reports along with higher-than-expected inflation data, has kept prices below the 20-week moving average thus far.
(XAGUSD Weekly Chart)
The potential for a significant breakout this year is increasing. Typically, after charts experience significant compression, a major breakout tends to follow. Bollinger bands are clearly indicating pressure. Since the big jump in 2020, the Bollinger band bandwidth (the percentage distance between the upper and lower bands) has never fallen below 12% much. After reaching 12% in the last two times, the price moved to both the upper and lower bands in just a couple of weeks in quick waves. Currently, the upper and lower bands are very close to the upper and lower lines of the triangle formation, intensifying the squeezing pressure even further.
Regarding downside potential, the 21.40-22 zone serves as the main support, while for the upside, there exists a broader resistance zone ranging from 24.75 to 26. The 20-week moving average, which acts as the midpoint of the Bollinger band, could serve as the pivot point (currently at 23.33, just below the 23.36 resistance) between these significant support and resistance levels. Regardless of the direction, 2024 could witness increased volatility following a potential breakout from either of these zones.
