Silver prices fell below $39.00 after hitting a 14-year high of $39.53. This drop is linked to an improved risk environment and a strengthening US dollar. Silver is now around $38.84, showing an increase of nearly 1.70% for the week. This rise is driven by strong US economic data and easing trade tensions, which lessen the demand for safe-haven assets. Silver is still trending upwards, remaining above the 21-day and 50-day Exponential Moving Averages (EMAs). The Relative Strength Index (RSI) on the daily chart is at 65, signaling a slight pullback without changing the overall trend. Key support levels are at $38.70 and $38.00, with the 21-day EMA at $37.81 providing additional support. Resistance is found at $39.00 and $39.53, and if these resistance levels are broken, silver could aim for $40.00. On the hourly chart, bearish pressure is evident with the 21-period EMA crossing below the 50-period EMA. An RSI of 41 indicates weakening momentum, while the Average Directional Index (ADX) at 37 shows that a trend is still in place. Silver acts as a store of value and a hedge. Its price is influenced by factors like interest rates and the US dollar. Demand comes from various industries, especially electronics and solar energy, significantly influencing prices in the US, China, and India. Silver prices often align with gold prices since both are seen as safe investments. A high Gold/Silver ratio could indicate that silver is undervalued. We interpret the recent decline from a multi-year high not as a trend reversal but as a healthy pause. The daily RSI indicates a cooldown, allowing the market to regain momentum before possibly rising again. Traders should monitor the support levels at $38.70 and $38.00 for potential long positions. Strong demand fundamentals create a solid price floor, mitigating worries about a recovering dollar. The Silver Institute recently predicted that global demand will hit 1.2 billion ounces in 2024, the second-highest level ever, driven by strong industrial needs for solar panels and electronics. This demand suggests that price dips due to changing risk sentiments may present good buying opportunities. However, we must acknowledge the short-term bearish signals on the hourly chart. The recent slowdown in the May 2024 US Consumer Price Index (CPI) has not ensured immediate interest rate cuts, keeping the dollar strong. This situation justifies using hedging strategies like buying put options to protect existing long positions from potential declines toward the 21-day EMA. Examining the relative value, there is a strong case for silver in the long run. The current Gold/Silver ratio is around 78, which is historically high. For reference, it exceeded 100 during the 2020 crisis, before silver significantly outperformed gold in the recovery. We believe a similar situation could occur again, allowing silver to catch up once interest rate uncertainties settle. Given the strong long-term outlook but short-term challenges, we don’t recommend chasing prices right now. Instead, using options to structure trades can take advantage of this scenario. Buying call options with strike prices near the key $40.00 level during dips provides a low-risk way to profit from the next potential upward move.

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