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Silver Price Rally Continues, With the Grey Metal Hovering Near 3-Year Highs

Silver prices rose to their highest level since May 2021  to trade at $28.44 an ounce at the futures market and $28.32 an ounce at the spot market.  The commodity has been on a steady ascent for the last 13 days and at a time when the US dollar has maintained its strength against many leading currencies. As of this writing, the DXY index is at 104.10.

As the geopolitical tensions in the Middle East seem far from over, many central banks have been purchasing gold and silver to diversify their reserves. China has been at the forefront of the stockpiling of precious metals and this is likely to be replicated by other central banks, as prices diverge from their traditional inverse relationship with US Treasuries.  Even with yields on 5-year and 10-year bonds staying above 4.200% for prolonged periods, investors have been slow to take up their profit on gold and silver holdings, instead increasing their purchases significantly.

Silver’s use as an industrial metal also provides tailwinds, as rising industrial production is likely to spur up demand. China reported an increase in its industrial activity in March after five months of decline. China’s National Bureau of Statistics reported a manufacturing PMI 50.8 for the month, renewing optimism of a turnaround for its troubled economy. Meanwhile, the S&P Global US Manufacturing PMI stayed above 50.0 for the third month in March, despite coming in at 51.9, and missing the forecast 52.5

Technical analysis

The momentum on silver price has dissipated and is currently downward-leaning as shown by the RSI indicator. The sellers are likely to remain in control if resistance at the 28.00 pivot mark persists. That could see them breach the support at 27.65, beyond which the commodity could test 27.44. However, if the buyers bring XAUUSD above 28.00, the resulting momentum could break the next resistance at 28.33 and potentially head to 28.49 in extension.