Silver Retraces Lower from Today’s Highs – Industrial Demand Still Main Driving Factor

Silver price has been following gold’s ascent but the past 3 sessions the silver market hasn’t been able to trade to new highs.

As silver often does, it has followed the recent spike of gold higher. However, the factors weighing on gold price may not hit this precious metal as hard. While interest rates do impact silver prices, the shiny metal is heavily more reliant on industrial demand than gold.

The last report from the Silver Institute estimates silver demand for 2024 will reach 1.2 billion ounces, the second highest number on record. The main driver of this increase will be industrial demand.

The report sees the auto and photovoltaic industries as the main sectors for a total industrial demand of 690 million ounces. On the other hand, geopolitical risks are less likely to create price pressure, so if these risks subside there may be less downward volatility.

Stock gains make holding silver less attractive, and the report estimates stock investment will fall by 6%. While lower interest rates in Q4 could help bolster more interest in investing in silver at the institutional level.

Technical View

The daily chart for XAG/USD below shows a market in a very clear bullish trend. However, there are some indications that a correction may be about to occur. The current silver price is at a level not seen since mid-2021.

The most recent high just fell short of a previous peak from August 2020 (blue line). While today’s candle is struggling with a resistance area that was set in May and June 2021 (orange line).

The RSI closed below 70 yesterday after various closes over 70, this event indicates a strong likelihood of a price correction. The current price level is also extremely far from the Ichimoku cloud, approximately 18%.

A distance of this kind between the market price and the Ichimoku cloud is also very rare. The cloud acts as an elastic, and the further away prices get the strong the chance of a rebound back toward it.

If the correction does happen I see the next support at $26.94, a level set back in March 2022 (black line). And the following support at $26.10 which was set between April and May 2023 (green line).

If instead, the market continues higher the next resistance is at the recent high at $27.79.