Silver prices have been soaring lately, with the XAG/USD soaring around $72.70 during the very beginning of Wednesday’s European trading session. Strong industrial demand in the high tech electronics and solar energy sectors is contributing to this upsurge. Plus, changing economic conditions in key markets like the US, China, and India are playing a role too. On the daily chart silver is now trading at around $72.19 and showing a consistent bullish trend.
Silver is famous for its incredible electrical conductivity, even better than copper and gold. This property of silver makes it vital for countless industrial applications. Consequently, the demand for silver only grows. According to some analysts, the price movements are largely being driven by the Gold/Silver ratio. This ratio indicates how many ounces of silver you need to equal the price of one ounce of gold. The latter is typically the leading indicator of investor sentiment for precious metals.
Industrial Demand Drives Silver Prices
The industrial sector makes a huge impact on the forces controlling silver prices. A substantial share of current demand comes from industries like electronics and solar energy, for which silver’s high conductivity is absolutely critical. In electronics, silver provides higher efficiency and performance by having a higher performance in nearly all electronic components including printed circuit boards and connectors.
Furthermore, silver’s importance in the production of solar energy is huge. It is used in photovoltaic solar cells, the technology that powers any solar panel by converting sunlight directly into electricity. Wind power and solar energy are booming—especially in emerging democracies. Consequently, demand for silver in this sector is poised to increase further.
Further, the US and Chinese economies have an outsized effect on silver prices because of their large industrial sectors. So when economic growth or austerity hits these nations, silver demand can swing in an instant. Continued strong industrial performance, particularly in photovoltaics, can only help bolster silver’s appeal and value, but potential economic slowdowns will put downward pressure on prices.
Economic Factors Influencing Silver Trends
The current dynamics of the US economy are very important to understanding upward silver price movements. For instance, upcoming data releases, such as Initial Jobless Claims scheduled for 13:30 GMT, can influence market sentiment and price trajectories. Since a strong labor market tends to indicate a strong economy, that could bring increased industrial demand for silver.
China’s economic activities are pivotal. China has recently become the largest consumer of silver in the world. Any increase or decrease in its industrial development can lead to dramatic price swings. Investors keep a close eye on Chinese economic indicators to determine new demand for silver.
Additionally, consumer demand from India for silver jewelry has a significant influence on prices. Cultural importance and auspicious times of the year fuel a demand surge, causing prices to skyrocket. Therefore, changes in Indian consumer demand can have a huge effect on the global silver markets.
Technical Indicators Suggest Future Movements
According to recent technical indicators, silver has entered bullish territory. The 20-day exponential moving average (EMA) is trending upwards, with the immediate price action comfortably above this significant line in the sand. This developing trend serves to keep a strong bullish investor bias in place.
The RSI (Relative Strength Index) is at 80.95, which is extremely high. This has created the first signs of overbought market conditions. Specifically, an RSI exceeding 70 usually indicates overbought conditions, meaning that the momentum might be about to take a breath or consolidate. Should this happen, silver might get support close to the 20-day EMA line at about $63.07.
If silver prices break under the 20-day EMA, it can open up for deeper retracement levels as overbought conditions unwind. To continue the uptrend, holding above this key level is very important. If we fall under it, perceptions in the market could change, causing investors to preemptively act to correct course.