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Silver prices predictions for January 2020: The metal could rise but technicals show decline

By David Becker

What can we expect from silver prices forecast this month?

Silver prices are nearly unchanged in January, at the halfway point of the month, and are likely to continue to consolidate for the balance of January. Despite the lacklustre silver price action, there are global forces that are likely to help buoy prices during the balance of 2020.

Silver prices are likely to rise if global economic growth starts to expand. If the US-China trade deal leads to further economic growth in China and the surrounding emerging markets, this could buoy both copper and silver prices.

Additionally, the seasonals point to higher silver prices in January. The technicals on the other hand point to declining prices, which likely means that traders that are bullish should wait for a better entry point.

Silver price this month: seasonals

Historically silver has experienced positive returns in January but at the mid-way point, the price change has been insignificant. Over the last 20-years, silver prices have been higher 70 per cent of the time, during the month of January for an average gain of 3.6 per cent. During the past 10-years, the returns have been the same. During the last 5-years, silver prices have been higher 100 per cent of the time for an average gain of 5.5 per cent. These statistics mean that silver prices could move higher from the current unchanged levels.

The dollar could ease

US yields have been relatively stagnant in 2020, as US data is mixed. Job’s data was softer than expected and the ISM manufacturing survey also signalled a contraction. The US ISM services, on the other hand, came in better than expected.

European yields have been on the rise and do to better than expected data. Recall the benchmark German 10-year yield is negative but becoming less negative. This is pushing the yield differential between the US and Germany in Germany’s favour which is helping to buoy the euro and weigh on the US dollar. A softer dollar will put a floor under silver prices, as silver is priced in dollars and a cheaper dollar means that foreign investors can pay a lower price for silver.

Latest silver price forecast: technicals

The technical outlook for silver over the short-term is negative. Prices have dropped more than $1 (€0.89, £ 0.76) per ounce after surging to $18.85 per ounce in early January following the Iranian counterattack on an Iraqi airbase that housed US soldiers.

Medium-term momentum is negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices.

Short term momentum is also negative as the fast stochastic is moving lower and the relative strength index is declining. Support is seen near the 50-day moving average at 17.30. The weekly charts show that silver prices are consolidating, and momentum is flat to neutral. Traders might consider looking for better prices to buy silver if they are bullish.

FURTHER READING: Silver price forecast 2020 and beyond

FURTHER READING: Copper price forecast for 2020 and beyond

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