Silver price continued its strong surge this week and is now hovering at its highest point in decades. It has crossed the important resistance level at $50 and is now up by over 80% this year. This article explores why the silver price and the SLV ETF may retreat soon.
Silver price jumps as SLV ETF inflows jump
Silver, a top precious metal, has been in a strong bull run this year. This price action has mirrored that of other top precious metals.
Gold price jumped to a record high of $4,100, while platinum and palladium have soared to $1,648 and $1,462. This surge also coincided with the recent US Dollar Index (DXY) crash. The dollar index was trading at $99 on Monday, down slightly from this week’s high of $99.55.
Silver has jumped as investors have moved to silver assets in the past few weeks. The closely-watched iShares Silver ETF (SLV) has added over $1.4 billion in assets this year. It added over $423 million in assets last week.
The surge also happened as demand for safe-haven assets rose as the geopolitical risk that was diminishing returned. Donald Trump announced that he would impose tariffs on China after Beijing launched multiple measures targeting the United States.
Trump said that the US would impose a 130% tariff on goods from China starting on October 1. In an X post on Sunday, he urged market participants not to worry about China as the two countries would likely reach an agreement.
China, on the other hand, announced measures to hit the United States, including barring exports of rare earth materials and magnets. It also announced new tariffs on US ships docking on China.
Consequently, the Fear and Greed Index moved to the fear zone as the stock market plunged. Chinese indices like the Hang Seng and the Shanghai Composite also pulled back on Monday.
Silver price also rose as investors predicted that there will be a lack of liquidity in London. This liquidity issue has become a major challenge such that some traders are now opting for air transport for silver bars to benefit from the ongoing premium for London bars.
At the same time, market participants are waiting for the ongoing probe by the US administration on critical minerals, a move that may see it add more tariffs on imports.
The ongoing silver price surge has boosted the top companies in the industry. Fresnillo share price has surged and become the best-performing company in the FTSE 100 Index. Other companies like Hecla Mining, First Majestic Silver, Fortuna Silver Mines, and Endeavor Silver have surged in the past few months.
Silver price technical analysis
The daily timeframe chart shows that the silver price has been in a strong uptrend in the past few months, moving from a low of $20 in October on October 23 to the current $52. It has jumped by 150% from that period.
The ongoing silver price rally faces potential pullback risks in the near term. For one, there is a risk that the stock will go through a mean reversion as it has moved substantially higher above the short and long-term moving averages. Its price is at $52, much higher than the 50-day and 100-day Exponential Moving Averages at $43 and $40, respectively.
The other main reason why silver price may crash is that the Relative Strength Index (RSI) has surged to the overbought level at 84. As such, while the silver price has more upside to go, there is a risk that it will pullback in the coming weeks or months as investors start to book profits. If this happens, it may drop to the key support at $45.
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