Technical Analysis and Market Sentiment

Silver prices are affected by various factors such as geopolitical issues, US Dollar changes, investment interest, and its use in electronics and solar energy. Silver tends to move in tandem with Gold because both are considered safe-haven assets. The Gold/Silver ratio helps show their value relationship. As of December 24th, 2025, silver’s rise to nearly $72.70 is fueled by strong expectations of Federal Reserve rate cuts in 2026. Lower interest rates make assets like silver more appealing, creating a bullish environment. Signs point to an upward trend as we enter the new year. With this positive trend, we should think about buying call options with strike prices around $75 or $80 for the first quarter of 2026. This move lets us take advantage of the upward momentum while controlling our risk. The CBOE Silver ETF Volatility Index (VXSLV) is at 34.8, its highest since October 2025, indicating that the market expects bigger price changes, which options can benefit from. However, we should be aware of the overbought signal from the Relative Strength Index, which is above 80. This suggests a high chance of a short-term price drop or a period of stability. Selling cash-secured puts at a lower strike price, close to the key support level of $63, could be a wise choice to earn income while we wait for a better entry point.

Market and Fed Expectations

The market expects rate cuts, but recent strong economic data, including a surprising 4.3% GDP growth in Q3, complicates that outlook. A similar situation occurred in late 2023 when strong economic reports delayed the Fed’s shift, causing sharp reversals in precious metals. This history cautions us not to be overly optimistic at these high levels. There is a clear disagreement between the market, which is anticipating at least two rate cuts in 2026, and the Fed, which predicts only one. This disconnect could lead to volatility in the coming weeks. We can prepare for this by using long straddles before the next FOMC meeting, potentially profiting from significant price movements in either direction after the Fed clarifies its stance. Strong industrial demand supports silver prices. Reports from November 2025 show a 9% year-over-year increase in consumption from the solar and electronics sectors. This solid demand suggests that any price drops due to changing Fed expectations will likely be seen as opportunities to buy. This reinforces our strategy to use pullbacks to build or increase our long positions. Create your live VT Markets account and start trading now.

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