Silver prices have jumped to $117.74, boosted by geopolitical tensions and a weak US Dollar. This represents an increase of over 8% in just one day. Although it hit a record high, the price stayed below $120 and eventually settled at $112.40. The Relative Strength Index (RSI) shows that silver is overbought but does not indicate that a price drop is imminent. If silver can break through the $120 barrier, it might climb to $130 or even $150, while $100 is a key support level. Silver’s value often reacts to geopolitical instability and changes in interest rates, benefiting when the US Dollar weakens. This metal is vital across various industries due to its excellent electrical conductivity, which drives prices based on industrial demand. Traders usually connect silver price changes to those of gold. The Gold/Silver ratio helps evaluate their relative values, suggesting investment opportunities when the ratio strays from historical averages. Silver is a favored investment for portfolio diversification and as a hedge against inflation. It can be traded physically or through funds that follow its global market prices. Investors should consider many factors, such as demand, supply, and currency strength, in their trading plans. With silver recently surging past $117 an ounce, we are experiencing significant volatility that derivative traders must navigate carefully. The intense buying activity is driven by serious geopolitical issues and a rapidly weakening US Dollar. Given this steep price increase, implied volatility in silver options likely rose, making premium-selling strategies appealing but also risky. For those who believe this rally will continue, buying call options with strike prices set at $120 or $130 is one way to participate with limited risk. A more cautious strategy would be to use a bull call spread to help cover the high costs of volatile options. This approach could be profitable if silver continues its rise toward the $150 target. On the flip side, with the RSI indicating overbought conditions, traders should be ready for a potential pullback. Those expecting a correction could consider buying put options with a strike price below the critical support level at $100, betting that prices could drop into the $90s in the weeks ahead. This movement isn’t just speculation; fundamental factors are supporting it. The US Dollar Index has fallen from over 105 in mid-2025 to around 97 now, largely due to the Federal Reserve’s unexpected more dovish stance. This dollar weakness benefits all commodities priced in dollars. Additionally, recent data shows strong demand that needs to be included in trading models. Reports from last week indicated that global solar panel installations in the fourth quarter of 2025 increased by 22% year-over-year, far surpassing expectations. Investment demand is also rising, with silver-backed ETFs adding over 15 million ounces just in January. Looking back, this type of sharp rise reminds us of the spikes observed in 2022, which typically led to quick price reversals. While the current trend is robust, traders may want to implement strategies like long straddles to take advantage of large price movements in either direction. These positions are costly to establish right now but could yield substantial returns if volatility continues.

here to set up a live account on VT Markets now