Silver price continued its strong bull run this week and crossed the important resistance level at $100 for the first time on record. It has jumped by over 40% this year and by 225% in the last 12 months. This surge has made it one of the best-performing assets. This article explores some of the reasons behind the rally and why a reversal is coming.
Why Silver Price is Soaring
Silver price has jumped because of its close correlation with gold, a precious metal whose demand has jumped in the past few months. Data shows that central banks have continued to accumulate gold aggressively as they pivot away from the US dollar.
Companies have also continued accumulating gold in the past few months. Tether has been the biggest accumulator of gold because of its Tether Gold product. It also uses gold to back up USDT, the biggest stablecoin in the world. It now holds gold worth billions of dollars.
Investors have also embraced Fear of Missing Out (FOMO) and bought substantial amounts of gold. Data shows that the SPDR Gold Trust (GLD) has gained billions of dollars in the last 12 months. Silver often rises when gold is in an uptrend because it is seen as a cheaper alternative.
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Meanwhile, silver has also jumped because of the rising hope that the Federal Reserve will embrace a more dovish sentiment this year, even as macro data shows that the American economy is firing on all cylinders.
Data released this week showed that the economy expanded by 4.4% in the third quarter, and analysts expect the fourth-quarter figure to come in at 5%. The bank will cut rates at least three times as Donald Trump will replace Jerome Powell with either Kevin Warsh or Rick Rieder.
Meanwhile, there are signs that silver demand is rising as the global economy recovers. A recent report by the IMF predicted that the economy will grow by 3.3% this year, helped by the ongoing AI boom and the fading impact of Donald Trump’s tariffs.
Silver does well when the world economy is doing well because it is often seen as an industrial metal that is used in the manufacturing of semiconductors and solar panels.
XAG Price Technical Analysis
The daily timeframe chart shows that the XAG price has been in a strong uptrend this year and is now hovering at its all-time high.
However, there is a risk that the metal will suffer a brief pullback in the coming weeks or days. One reason is that it has deviated substantially from the short-term and long-term moving averages.
Silver is trading at $101, while the 50-day Exponential Moving Average (EMA) is at $72 and the 100-day one is at $61. Therefore, silver may go through a mean reversion, where an asset moves back to its historical averages.
Silver has also become highly overbought, with the Relative Strength Index (RSI) and the Percentage Price Oscillator (PPO) moving to the overbought level.
Therefore, the silver price will likely retreat as investors start to book profits. If this happens, the next key support level to watch will be at $90.
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