Silver price is trading higher on May’s first trading session. However, it remains range-bound as investors looking to trade silver evaluate the US economic recovery and dollar dynamics.
US Infrastructure Spending
One of the factors that are likely to impact silver price in the new month is President Biden’s infrastructure plan. In addition to its role as a safe-haven, silver is also an industrial metal. With the announcement of the $2 trillion US infrastructure plan came the proposal for a 10-year extension of the Investment Tax Credit (ITC).
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A tax credit is the income tax reduction for an individual or firm. In the case of the ITC, a proprietor enjoys a 26% deduction of the installation costs for a solar energy system. Notably, silver is largely used in manufacturing solar panels. As such, the approval of Biden’s proposal will boost the metal’s demand.
US Dollar Dynamics
Silver price will also be reacting to the price movements of the US dollar. After hitting an intraday low of 1.62 on Friday, the 10-year US bond yields are at 1.64. While that has offered some support to the greenback, the risk-on attitude has lowered the demand of the currency as a safe-haven. On Monday, the dollar index was down by 0.45% at $90.88. Investors of precious metals will be keen on how the dollar dynamics play out.
Silver Price Technical Outlook
Silver price has begun the new month at a higher note. At the time of writing, it was up by 0.78% at 26.13. However, it remains range-bound between 26.49 and 25.72. On a four-hour chart, it is trading along the two-week and four-week exponential moving averages with an RSI of 51. Based on these indicators, the outlook is rather neutral. At this point, the possibility of a bearish or bullish breakout is of equal measure.
On the one hand, continued recovery of the US economy, and subsequent strengthening of the greenback, will be a bearish catalyst for silver price. If that happens, the target will be 25 and 24. On the flip side, high demand driven by US infrastructure spending could push silver price to the higher levels of 27 and 28.
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