Mexico’s Recent Mine Shutdown Will Limit Silver Supply
Yesterday’s strength has turned into a test of a key resistance level near the 20 EMA at $14.60. At this point, the attempt to breach the resistance was unsuccessful, but silver may make an attempt to get through the key resistance level in the near term.
The U.S. dollar dynamics are not helpful for precious metal upside since the U.S. Dollar Index has breached the psychologically important 100 level and continues its upside move.
The U.S. dollar is gaining ground against a broad basket of currencies as investors increase their purchases of safe haven assets due to continued problems on the coronavirus front.
The total number of registered coronavirus cases in the world has breached the 1 million mark, while the real number of coronavirus cases could be much bigger as testing is insufficient even in the most developed countries.
It remains to be seen whether silver will see a boost if the global markets experience a sell-off due to coronavirus worries. Industrial demand is a major part of the demand for silver so the current economic problems will surely hurt silver demand.
On the other hand, silver mines are not immune from virus containment measures, so silver supply gets hurt as well. Mexico has implemented lockdown measures and the country’s mines had to shut down since they were marked as non-essential operations.
Mexico is the world leader in silver production so the lockdown in this country will have a significant impact on silver supply. This is certainly a bullish development for silver.
Silver tries to get through the major resistance level near the 20 EMA at $14.60. In my opinion, the move past this level would trigger rapid upside since it is highly likely that many traders have tried to short silver near recent highs, and they’ll exit their positions once this key level is breached.
In this scenario, silver will have a good chance to head towards the 50 EMA which is currently located at $15.75.
On the support side, the $13.80 – $14.00 area remains the major support level for silver. The breach of this level will signal the end of the current upside trend.
This article was originally posted on FX Empire
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