SLV ETF and Silver Price: Extremely Bullish Pattern Forms

Silver price has been in a strong comeback in the past few weeks as investors buy the dip. The XAG/USD price has jumped by more than 36% from the lowest level this year. It is hovering near the highest level since April this year. Similarly, the iShares Silver Trust (SLV) price has risen by 36.95% in the same period.

Inflation stabilizing as Fed tightens

Silver price has staged a strong comeback in the past few weeks as commodity prices rebounded. The Bloomberg Commodity Index (BCOM) has risen by low double digits in the past few days as the US dollar pulls back.

Silver has done well even after the hawkish stance by central banks. Last week, the Fed, ECB, and Bank of England decided to hike interest rates by 0.50%. These rate increases were in line with what analysts were expecting.

In its statement, the Federal Reserve hinted that it will continue hiking interest rates in the coming year. It signaled that the terminal rate will peak at 5.1% in 2023, which was higher than estimates. Notably, this statement came a day after the US published encouraging data. The numbers showed that the headline inflation dropped from 7.7% in October to 7.3% in November.

Historically, silver price tends to do well in a period when the Federal Reserve is in a dovish tone. Therefore, this price action is likely a sign that investors expect the Fed will not be as hawkish as what the bank said.

Catalysts for silver prices

There are several catalysts for silver and SLV prices in 2023. First, silver will benefit from its use in solar panels. Today, about 10% of all silver is used in solar panels manufacturing. A decade earlier, silver’s use accounted for 4%. As such, if it grows by another 150% in the decade, its impact on silver prices will become clear. 

Further, silver prices will react to the rising demand in the EV industry. Silver is used widely in the EV industry. As demand rises, the company could benefit substantially in the coming years. Another factor is that silver could benefit from a relatively weaker US dollar.

SLV and silver price forecast

The SLV ETF is 100% correlated with each other. Therefore, the performance of silver price will be correlated with that of the ETF. On the daily chart, we see that silver prices have been in a strong bullish trend in the past few weeks. It has formed a golden cross, where the 200-day and 50-day moving averages make a bullish crossover. 

The index moved above the 61.8% Fibonacci Retracement level. Therefore, silver and XLV prices will likely continue soaring a buyers target the next key resistance point at $26. A drop below the support at $23 will invalidate the bullish view.

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