Silver prices rose over 5% this week due to tensions from the US trade war, reaching $108. A failed attempt to reach $118 and a divergence in the RSI indicate that momentum is slowing. For silver to gain further, it needs to break above $110, but dropping below $100 could lead to a pullback. Silver’s technical outlook shows a strong upward trend, but signs point to possible bearish movement. The RSI diverging from price raises the chance of a price decline. If silver falls below $100, it might target key support levels at $96.14 and $90.46.

Understanding Silver’s Market Dynamics

Silver is a popular precious metal used for diversifying investments and protecting against inflation. Its price is affected by geopolitical events, interest rates, and the strength of the US dollar. Industrial demand, particularly in electronics and solar energy, also plays a role in silver’s value. Silver’s movements often align with those of gold because both are considered safe investments. The Gold/Silver ratio helps assess their relative values. A high ratio could mean silver is undervalued, while a low ratio may indicate gold is undervalued. The current silver price of $108 is largely influenced by the ongoing trade war, which has strengthened the “sell America” trend in global markets. The US Dollar Index has also posted its worst quarterly performance since 2023 and has dropped below the 90 mark for the first time in two years. However, last week’s inability to surpass the $118 level suggests that the rally may be losing steam.

Technical and Strategy Considerations for Silver

We are now seeing significant technical warning signs, such as the ‘shooting star’ candle and a bearish divergence on the Relative Strength Index (RSI). These indicators appear alongside new data showing global manufacturing PMI has contracted for three straight months, possibly decreasing silver’s industrial demand. This trend suggests that recent price movements may be more about speculative investments rather than strong fundamentals. With implied volatility for silver options exceeding 60%, the market expects considerable price fluctuations, making long positions costly. Buying protective put options below the important $100 psychological level is a smart strategy to protect against potential sharp declines. Such a decline could happen if the “sell America” narrative eases, bringing the January 23rd low of $96.14 into focus. For those expecting a pullback but not a total collapse, a bear put spread can be a more cost-effective way to express a bearish outlook. This involves buying a put option with a strike price near $105 while selling another put with a strike around $98. This strategy caps potential gains but significantly lowers the initial cost, which is beneficial in a market with high option premiums. Historically, we saw a similar speculative frenzy during the commodity boom of 2025, when geopolitical fears peaked. That time was marked by rapid price increases followed by sharp corrections once immediate headlines faded. The speed of those reversals serves as a warning for anyone believing the current upward trend will continue without testing lower support levels. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now