In March, the price of silver rebounded significantly. Let’s analyze the technical picture and the major market drivers that might impact the grey metal in April.
Key Takeaways
- Silver jumped to $26 but struggled to break above this level
- US central bank expected to start rate-cutting cycle soon
- Macro scenario positive for silver
- Silver demand higher than the volumes mined in 2023
- Gold/silver ratio remains high.
Silver price movements and outlook
Silver rebounded in March, alongside gold. The price jumped up to the resistance area of $26, but the sellers returned active, curbing the recovery attempts.
Overall, the price remains in the wide trading range between $22 and $26, which has represented the recurring theme of the last few months.
Unlike gold, silver has not found a strong enough bullish impulse to trigger a solid rally, and both the all-time high of around $50 per ounce and 2020 and 2021 records of around $30 remain far away. Despite this, a large majority of analysts are optimistic about the outlook for silver.
Looking at the price of silver, it seems that investors are not yet fully aware of what the Silver Institute announced in a recent report: the demand for silver is now higher than the production, and this trend is likely to continue in the long term.
Moreover, the sectors generating the largest part of the demand are growing fast. Among them are the photovoltaic, electric cars, and 5G technology sectors. Demand from the jewellery industry is expected to rise strongly, at 6% yearly.
Is silver undervalued? It’s hard to say. O ptimism about silver seems justified, also because central banks are expected to cut rates in the next few months.
Technical analysis for silver
Silver’s recent recovery lost steam as the metal hit the resistance level of $26 per ounce. Since then, it has entered a lateral trading range between $22 and $26.
A clear break above the $26 threshold could make space for more ambitious targets, potentially also in the region of $28-28,30, while the following resistance of $30 seems harder to reach, at least for now. In case of declines, a first support is at $23.3, followed by a much more important zone at $22, on the lower edge of the current trading range.
Gold Silver ratio
The gold-to-silver ratio expresses the number of ounces of silver needed to buy one ounce of gold. Currently, this ratio is in the region of 88, well above the medium and long-term average. This could be seen as another element that could support silver, which is looking relatively cheap compared to gold.
What are the key risks for silver?
The overall scenario for silver appears extremely positive, but there are also potential risks, which could curb the rebound of the price.
A recovery of inflation is one of them. Indeed, it could force central banks to postpone the start of the rate-cutting process. Another element to consider is the USD: a strong greenback could dent the demand for silver. We should also keep into account the possibility of a slowdown of the industrial sector, although this scenario seems relatively unlikely at the moment, considering that the lion’s share of the demand is coming from fast-growing industries such as photovoltaic, 5G technology and electric cars.
Carlo is an external market analyst for Kinesis Money. With a credential background in Economic Finance and International Exchange (MA), Carlo’s critical analysis of gold and silver markets’ performance is frequently quoted by leading publications such as Forbes, Reuters, CNBC, and Nasdaq.
This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.
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