Silver futures hit $100 earlier but now spot prices have also moved above this big level for the first time ever. Silver has been breaking milestone after milestone, with traders happy to buy every dip they could get their hands on. For now, the silver forecast remains bullish, but we are wary of profit-taking around these levels which could put some downward pressure on prices in the near-term.
What has been pushing silver higher?
It has been supported by many factors including haven demand and interest rate cuts, although the main factor behind the eye-watering gains has been due to short-term tightness in supply. For that reason, it is difficult to say how much further will silver rise and how long it will be able to sustain itself at current record levels. Supply remains the market’s biggest constraint. Most silver is produced as a by-product of other metals, which means output can’t be ramped up quickly when prices surge. Declining ore grades, environmental restrictions and a lack of major new projects in key producing regions have kept supply tight for years. Global demand has now exceeded mine supply for five consecutive years.
Key question is where does silver go from here?
Well, I think a bit of profit-taking should be expected at these levels, even by the most bullish enthusiasts. That doesn’t necessarily mean you should go out there and start shorting silver. There will be a time for that, too. But late buyers need to be cautious that prices could potentially ease from these eye-watering levels.
From the dollar side, it has been an interesting week after all the tariff-related volatility. However, volatility has already cooled, and the dollar has remained largely on the back foot, especially against commodity and emerging market currencies. We have also seen record highs for precious metals, which underscore the ongoing “dollar debasement” trade. Here, fears of a more politically influenced Fed is pushing investors towards gold and silver.
Until such a time we see a big red candle to provide us with a clear hint of a market top, the bears will need to remain on the sidelines.
-- Written by Fawad Razaqzada, Market Analyst
Follow Fawad on Twitter @Trader_F_R
