Silver breaks to 32.5 and 11-year highs

Silver quotations, as expected, continued the upward movement. At that, there was a sharp acceleration of growth on Friday, which coincided with the breakdown of the level of $30 per ounce. Probably, at this mark the losses for many bears became too big, and they preferred to close short positions on silver. At the beginning of Monday's trading session, a new 11-year high was set, the price was above the level of 32.5. The current momentum will surely be followed by a correction, which can be used to buy silver in anticipation of further price growth.

According to Daniel Ghali, senior commodity strategist at TD Securities, silver's breakthrough through the level of $30 may trigger a wave of purchases by exchange-traded funds. Previously, ETFs on silver have not enjoyed significant investor demand, and their holdings have steadily declined. However, the situation is changing now, with Bloomberg reporting the most bullish investor view on silver in more than 2 years.

Bloomberg analysts consider silver to be the most interesting asset among all precious metals. Previously, market participants were focused mainly on gold, which was expressed in a very high ratio between gold and silver. This indicator at the beginning of 2024 exceeded the level of 90, but even with the current drop below 80 it is still very far from the average 20-year values around 68. Citigroup experts expect silver to maintain its advantage, and its ratio to gold will soon reach the level of 70.

Fundamentally, silver price growth is supported by a significant shortage of supply. According to Market Index estimates, due to the shortage of silver, its accumulated reserves have fallen from 1.2 to 0.8 billion ounces over the past 3.5 years. At the same time, a significant part of silver is in reserves of central banks and private investors, and in free access it is less than 0.3 billion ounces. The depletion of reserves may occur in the near future.

The RSI indicator has entered the overbought zone, indicating a pullback in silver prices. Correction to the range of 30.5–31 will be a good opportunity to buy, with the target as a return to the level of 32.5.

The following trading strategy may be offered:

Buy silver in the range of 30.5–31.  Take profit – 32.5. Stop-loss – 29.7.