Silver prices are currently strong, sitting close to a record high of $62.89. This stability comes from a gentle approach by the US Federal Reserve and worries about an AI bubble. However, the 4-hour Relative Strength Index (RSI) shows a bearish divergence, which suggests caution for buyers.

No Major Trend Change

The US Federal Reserve recently cut interest rates by 25 basis points, with no future rate hikes expected. This has weakened the Dollar and supported gold and silver prices, creating interest in potential rate cuts in 2026. Despite a 25% rally over three weeks, the market shows no major trend changes. Immediate resistance is at Wednesday’s peak of $62.90, with more resistance at $63.85 based on the 261.8% Fibonacci extension. If prices exceed this, they may reach the psychological level of $65.00. Support levels are at $61.50, $60.00, and $59.35. Traders are drawn to silver for its volatility, potential value, and hedging benefits. Factors like geopolitical tensions, economic changes, and industrial demand cause price fluctuations. The silver market often follows gold’s movements, influenced by the Gold/Silver ratio, which indicates how the two metals’ values compare. With the Federal Reserve’s dovish stance and a weak dollar, silver continues to see support. The recent rally, with a gain of over 25% in three weeks, introduces significant risk for those holding long futures contracts. This situation suggests that traders should focus more on strategies to manage volatility rather than directional bets.

Potential Risk and Strategies

The bearish divergence in the 4-hour RSI signals that upward momentum is slowing, though prices remain high. Traders expecting a pullback might consider buying put options with a strike price near the $61.50 support level. This approach is a wise way to protect long positions or speculate on a decline, minimizing risk if the market shifts in the next few weeks. On the other hand, those confident in the ongoing trend might sell out-of-the-money cash-secured puts below the $60.00 level to collect premiums. This strategy benefits from time decay and the higher implied volatility currently present, allowing a way to enter long positions at reduced prices during a correction. It’s important to recognize that strong industrial demand for silver creates a solid price floor, unlike the price spike in 2011. Global industrial use is hitting record levels, particularly from the solar and electronics sectors, with annual demand now exceeding 800 million ounces—up from about 650 million ounces just a couple of years ago in 2023. This sustained demand makes a complete price crash unlikely. Additionally, the Gold/Silver ratio has dramatically reduced from its highs above 85 in early 2024, showing silver’s recent strength compared to gold. However, an extremely low ratio could signal that silver is overvalued in relation to gold. A shift in this ratio might indicate that the focus in precious metals is returning to gold. Create your live VT Markets account and start trading now.

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