The price of silver has seen a strong rally over the past few days on hopes of increased demand in the coming weeks. XAG/USD price hit a high of $21, which was the highest level since June 22. It is up more than 18% from the low this year, meaning it has outperformed gold recently. Similarly, SLV stock price has also risen sharply recently.
Why are silver and SLV increasing?
Silver and other metals like gold, copper and nickel had a tough performance in September as the US dollar index hit its highest level in more than two decades. Silver crashed to a multi-year low of $17 as the Bloomberg Commodity Index (BCOM) fell more than 10%. Historically, these commodities tend to have an inverse relationship with the US dollar.
Recently, however, the price of silver has rebounded even as the US dollar index remains at its highest level in over 20 years. This price action is mainly due to investors believing that silver has become incredibly oversold or undervalued. In fact, at its lowest level this year, it was down more than 40% from its highest level.
Notably, silver’s performance mirrors that of popular cryptocurrencies such as Bitcoin and Ethereum. After bottoming out this year, these coins are up around 10%. This could be a sign that investors are now turning to riskier assets.
Another reason silver and SLV stock price surged is that investors believe the Federal Reserve will begin to pivot in the coming months. A pivot will likely be triggered by the next earnings season. SLV, the iShares Silver Trust, tends to track the performance of silver.
Silver Price Prediction
The daily chart shows that the price of silver crashed to a low of $17.56 on September 2. It has now bounced back since then. And along the way, it formed what looks like an inverted head and shoulders pattern.
In most cases, this pattern is usually a bullish sign. It is now targeting the cleavage of this pattern as the metal has moved above the 25 and 50 day moving averages. The Relative Strength Index (RSI) is approaching its overbought level.
Therefore, silver and SLV stock price will likely continue to rise in the coming weeks. Silver will likely hit a high of $24.84, which will be the highest point since April. A drop below the support at $19 will invalidate the bearish view.