In just a few short weeks, silver prices have jumped up to around $36.20, the largest increase in the current precious metals bullish cycle. The metal has recently jumped over a large resistance level. This major short-term resistance was established by the October 22 high at $34.87. Analysts note that this former peak now serves as an important new support level, boosting the bullish case for silver.
Here, the current dynamics in the global economy serve as driving forces behind silver prices. This is particularly evident in the three biggest emitters – the US, China, and India. Industrial demand is ramping up faster than anyone expected, especially in the electronics and solar sectors. Silver’s market position is becoming even more bullish.
Market Trends Fueling Silver’s Ascent
In fact, silver prices have rocketed higher in the past several days, streaking higher with powerful bullish momentum. The 14-day Relative Strength Index (RSI) has surged above 70.00, corroborating this trend. This is a very positive sign of buying demand in the marketplace. In short, prices are likely to go up even more in the short term.
Silver has historically been well-known for its excellent electric conductivity, besting even copper and gold. This unique quality has made the metal extremely valuable across industries. Because of this, it plays a major role in fuelling the current crisis demand for it. As sectors grow, particularly in technology and renewable energy, silver is primed for an upswing. Its value will only go up from here, and by a huge amount.
Furthermore, the silver market is expected to face a “supply deficit for the fifth consecutive year,” according to analysts at Commerzbank. This expected deficit underlines the extreme supply-demand balance that is rocking today’s up and down price action.
“The supply deficit for the fifth consecutive year will likely keep upward pressure on prices.” – Commerzbank
Resistance Levels and Future Projections
Even with this recent move higher, silver has major resistance looming overhead at the $40.00 psychological level. Analysts think it is doable to break past this threshold. In practice, though, it would require incredible momentum and consistent, unwavering demand signals from the industrial and retail markets.
The gold/silver ratio simply indicates how many ounces of silver are needed to match the value of a single ounce of gold. Investors continue to treat it as a make-or-break metric. A quickly increasing ratio might time a good valuation for silver in comparison to gold, attracting more money into the broader market.
Traders remain focused on overall market sentiment as well as economic signals. They are further focused on technical indicators, like the 20-day Exponential Moving Average (EMA), which currently sits around $33.85. Bullish near-term trend indicated by this EMA provides further impetus for investors to look at silver as a promising asset.
Economic Factors Influencing Silver Demand
Speculation, alongside the interaction between the US, Chinese, and Indian economies, keeps driving up volatility in silver prices. The United States and China are now the two leading industrial users of silver, incorporating it into an astonishing 89 different manufacturing processes. This intense pressure from high-demand large economies creates severe impacts on global pricing regimes.
At the same time, Indian consumers drive silver prices largely because of their demand for jewelry. Cultural traditions and festive season consumption fuel this thirst, bringing India to the rank of one of the world’s largest consumers of silver jewelry. When enough consumers vote with their dollars as trends rapidly shift, the effect can be drastic on changing the entire competitive landscape.
Commerzbank notes that while current demand is strong, projections hint that “demand will likely decline and supply to increase” in the future. This possible change would change the paradigm for future silver prices if it does happen.