- Silver price approaches the upper end of its range as bullish momentum drives prices higher.
- Supportive long-term fundamentals, including strong global growth and increased demand, contribute to the positive outlook for silver.
- US Industrial Production data surpasses expectations, indicating a rise in demand from various industries.
Silver (XAG/USD) is experiencing upward momentum, with prices surging by over one and a half percentage points to the $25.20s on Friday. The rally is primarily driven by technical buying and bolstered by optimistic long-term fundamentals.
Following the release of US Industrial Production data, which showed a 0.1% increase in February compared to expectations of no growth, silver prices saw a boost. This positive data, released by the US Federal Reserve, also marked an improvement from the previous month’s negative 0.5% reading.
An optimistic global growth forecast has led experts like Marcus Garvey of Macquarie to anticipate further gains for silver as demand rises in sectors such as solar panel manufacturing, electronics, and jewelry production.
Despite recent inflation data suggesting delays in potential interest rate cuts by the Federal Reserve, silver bulls remain undeterred. Normally, higher interest rates would negatively impact silver as a non-yielding asset in a high inflation environment. However, the current scenario has not followed this trend.
The Silver Institute predicts strong demand for silver in 2024, expecting it to reach its second-best year on record with demand reaching 1.2 billion ounces.
Technically, XAG/USD is consolidating within a range of $19.00 to $26.00, part of a broader range spanning $17.50 to $30.00. The current short-term bullish trend is approaching the upper bounds of the narrower range. A decisive breakout above $25.85 could signal further upside potential, with targets around $29.50 or close to $32.00 based on Fibonacci ratios.
If silver breaks out above the broader range, a target of $37.50 could be in sight. However, the precious metal may face resistance near the $25.80-90 levels before any potential pullback.
Traders are advised to wait for a clear breakout signal before entering the market, characterized by a strong daily candle closing above the key level or a series of consecutive green candles breaching the resistance level.
Silver versus US Dollar: Weekly chart
Additional Insight:
Silver’s role as an industrial metal, in addition to its valued status as a store of wealth, positions it favorably in a growing global economy. The increasing demand for silver in various sectors, coupled with favorable market conditions, suggests a positive outlook for silver prices in the near future. The technical analysis outlined in the article provides valuable insights for traders looking to capitalize on potential breakouts and movements in the silver market. As the market dynamics evolve, staying informed and monitoring key indicators will be crucial for making informed trading decisions in the silver market.