Silver price has staged a strong recovery in the past few days amid hopes of more demand in the coming weeks. XAG/USD price jumped to a high of $21, which was the highest level since June 22. It has risen by more than 18% from the lowest level this year, meaning that it has outperformed gold recently. Similarly, the SLV stock price has also climbed sharply recently.
Why are silver and SLV rising?
Silver and other metals like gold, copper, and nickel had a difficult performance in September as the US dollar index surged to the highest level in more than two decades. Silver crashed to a multi-year low of $17 while the Bloomberg Commodity Index (BCOM) dropped by over 10%. Historically, these commodities tend to have an inverse relationship with the US dollar.
Recently, however, silver price has bounced back even as the US dollar index remains at its highest level in more than 20 years. This price action is mostly because investors believe that silver has become incredibly oversold or undervalued. Besides, at its lowest level this year, it was down by over 40% from its highest level.
Notably, the performance of silver mirrors that of popular cryptocurrencies like Bitcoin and Ethereum. After crashing to the lowest level this year, these coins have risen by about 10%. This could be a sign that investors are now shifting to riskier assets.
Another reason why silver and the SLV stock price jumped is that investors believe that the Federal Reserve will start pivoting in the coming months. A pivot will likely be triggered by the upcoming earnings season. SLV, the iShares Silver Trust, tends to track the performance of silver.
Silver price prediction
The daily chart shows that silver price crashed to a low of $17.56 on September 2nd. It has now been rebounding 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 neckline of this pattern while the metal has moved above the 25-day and 50-day moving averages. The Relative Strength Index (RSI) is approaching its overbought level.
Therefore, silver and the SLV stock price will likely keep rising in the coming weeks. Silver will likely rise to 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.
