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(Kitco News) – A sharp selloff in silver has caught some investors off guard as the price is seeing solid selling pressure falling 5% on the day and dropping significantly below $25 an ounce.

However, while silver could see further selling pressure in the near term, some analysts said its structural bull market remains intact.

“Today’s price action was mostly profit-taking and weak long liquidation from the shorter-term futures traders,” said Jim Wykoff, senior technical analyst at “However, strong follow-through selling pressure and a technically bearish weekly low close on Friday would begin to suggest a market top is in place. Bulls need to step up Friday.”

July silver prices last traded at $24.38 an ounce, down nearly 5% on the day.

Edward Moya, senior market analyst at OANDA, said that while silver’s selloff has been dramatic, the downside move is not surprising as the bullish momentum was looking a little exhausted.

“Can silver go lower, yes, but I don’t see this as the beginning of a new bearish trend,” he said.

Moya added that global economic uncertainty, the ongoing debt ceiling debate, the impending default deadline, and the banking crisis will continue supporting precious metals like gold and silver.

“I think it’s more likely we will see $30 in silver before we see $20 in silver, but within that range, there is going to be a lot of volatility,” he said.

Daniel Ghali, senior commodity strategist at TD Securities, said he wasn’t overly worried that silver’s bull trend is over. He added that while the extent of the selloff has been surprising, he sees this more as a short-term technical move in the price.

Ghali added that a lot of the weakness in silver is the result of new momentum in the U.S. dollar; however, he said that he sees the U.S. dollar index’s push to 102 points as short-lived short covering.

“We see this as a repositioning move in the U.S. dollar to reflect some profit taking from firms short the U.S. dollar,” he said. “A lot of this selloff in silver we are seeing is technical in nature.”

Along with shifting positioning in the U.S. dollar, analysts note that recession fears are causing silver to underperform gold significantly. More than 50% of silver demand comes from industrial applications and can be sensitive to global economic weakness.

Phillip Streible, chief market strategist at Blue Line Futures, noted that disappointing economic data out of China caused copper prices to see a major breakdown below its 200-day moving average, which could be weighing on silver.

Streible said that while silver could be a good buy at current levels, he is more neutral on the precious metal to see if it will hold support at around $23 an ounce.

Although silver remains in a healthy uptrend, Ghali said that he expects gold to continue to outperform in the precious metal. He noted that with TDS economists looking for the U.S. to fall into a recession this year, weak industrial demand will weigh on silver compared to gold.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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