On Monday (August 5th), spot silver plummeted by over 4.5% and fell below the key 100 day moving average. Analyst Christian Borjon Valencia's latest article on Tuesday analyzed the technical trend of silver prices.

Valencia pointed out that silver prices plummeted by over 4.50% on Monday, and the outlook turned bearish. Technically, silver is expected to further decline.

Spot silver closed down 4.55% on Monday at $27.23 per ounce, with silver prices hitting a intraday low of $26.49 per ounce.

Valencia wrote that due to weak US economic data leading to a deterioration in risk appetite, silver prices continued their downward trend on Monday and fell below the 100 day moving average of $28.67 per ounce, with a intraday decline of over 4.50%. Weak US data once again raised concerns about economic recession. The ISM manufacturing purchasing managers' index and the non farm employment report disappointed investors, who flocked to safe haven assets, mainly US treasury bond bonds. Silver prices plummeted after hitting a daily high of $28.67 per ounce.

Jim Wycoff, senior analyst at Kitco Metals, said, "Investors were scared and quickly sold everything they could, including gold and silver

How does silver go after a sharp drop?

Valencia pointed out that after the sharp drop in silver prices on Monday, the momentum was favorable for sellers, as shown by the Relative Strength Index (RSI), which is close to oversold levels in a normal trading environment.

Valencia stated that if silver continues to decline and closes below $27.00 per ounce, buyers will be forced to hold onto the 200 day moving average of $26.02 per ounce. Once it falls below this level, the seller will push the spot silver price to the latest cycle low of $24.33 per ounce, which is the low point on March 27th.

Daily chart of spot silver

Valencia added that, on the contrary, if buyers recover $28.00 per ounce, the next resistance level will be the peak of $29.22 per ounce on August 2nd. If this level is overcome, it is expected that silver prices will further rise, with the next resistance area located at the 50 day moving average of $29.79 per ounce.