Key Takeaways
- Silver rose to a multi-year high Tuesday, with the gray metal supported by increasing industrial demand, ongoing geopolitical risks, and its appeal as an alternative inflation hedge.
- Silver looks attractive when looking at the gold/silver ratio that currently sits at 83, above its 30-year average of around 67.
- The silver price may find support around $26 during retracements from the top trendline of a prior trading range, and resistance from a measured move near $29.75.
Silver (SILVER) price gains may be somewhat dull compared gold’s (GOLD) glistening returns over the past year. But since the start of this month, the gray metal has added 12% compared to gold’s 5% gain as investors seek an alternative asset to take advantage of a resilient economy, protect against heighted geopolitical risks, and guard against elevated inflation.
Like its yellow-metal metal counterpart, silver also enjoys a reputation as a safe-haven asset, but also benefits during periods of economic expansion due to its increased use in industrial applications from chip manufacturing to solar panel production. In addition, silver, like other precious metals, remains supported by its finite supply, with more silver being used than mined each year.
Therefore it comes as little surprise that investors continue to bid up silver prices as the economy remains surprisingly resilient despite ongoing geopolitical tensions in the Middle East and inflation remaining stubbornly high.
“Silver appears to have benefitted from both the investment/consumer and industrial demand sectors, each making up 50% of total silver demand,” Heraeus analysts told precious metals site, Kitco News.
Silver also stacks up attractively when looking at the gold/silver ratio—a measure that expresses the price relationship between the two metals. Currently, one ounce of gold buys investors roughly 83 ounces of silver. That compares to the 30-year average of around 67 ounces.
The silver price has moved sharply higher above an 11-month trading range following the 50-day moving average crossing the 200-day moving average to form a golden cross signal, a well-known chart pattern that often precedes the start of a new uptrend.
During future retracements, investors should monitor the $26 level, where the metal’s price is likely to find buying interest near the range’s top trendline, which has flipped from an area of prior resistance into support. To determine an upside target, investors can measure the distance in dollars between the range’s upper and lower trendlines and add that amount to the breakout point. For instance, adding $3.75 to $26 indicates a potential profit taking area of around $29.75.
The spot silver price closed Wednesday up 1.1% at $28.13 ahead of key CPI inflation data Wednesday that will factor into the Federal Reserve’s decision on when to start cutting interest rates. Silver is trading at its highest level since mid-2021.
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As of the date this article was written, the author does not own any of the above securities.