Silver's growth potential is increasing

Silver prices rose sharply over the past week and hit a 2-month high of $25.04 per ounce. The precious metal was supported by weak data on U.S. inflation. In the short term, silver might have a great upside potential, at least until the Federal Reserve’s (Fed) decision on interest rates is published.

The silver rally was driven by the U.S. Consumer Price Index data release for June. According to the published data, the monthly inflation rate in the country was at 0.2%, despite the previously forecasted 0.3%. As a result, investors suggested a probable pause in the Fed's monetary tightening cycle.

As partner at Crescat Capital Tavi Costa said, the precious metal is likely to break the 10-year resistance level this month. Breaking through this level on the silver chart will also be accompanied with the gold price reaching new highs.

In the medium term, tighter carbon emission limits and higher green energy production targets will boost silver prices as well. The white metal is a key component in solar power generation and electric vehicles. However, there might be supply shortages of the precious metal this year due to the factors mentioned above.

Previously, there had already been silver shortages as demand exceeded supply as far back as 2019.

Silver is headed to rise. The price has gone out of the descending correction channel on the D1 timeframe.

In terms of wave analysis, silver prices are in the formation of the first ascending wave on the H1 timeframe. The corrective 2-day component may indicate the beginning of the second downward wave formation. Relative Strength Index (standard values) indicates divergence, which gives an early signal for the first wave’s transition into the second one. Given the growth strength of the last impulse, it is worth considering trades in the same direction.

Signal:

The short-term outlook for silver suggests buying near the level of 24.20.

The target is at the level of 25.05.

Part of the profit should be taken near 24.60.

The Stop-loss is set at 23.60.

Bullish trend has a short-term character, so the trade volume should not be more than 2% of your balance.