Silver price made a strong bullish breakout this week, helped by the strong performance of gold, which has jumped to a record high. It jumped to a high of $27.10 on Thursday, its highest level since June 2021.
Gold and industrial activityThe main reason why the silver price is soaring is that it is often seen as a good alternative to gold. Gold has jumped for two straight weeks and is nearing the important resistance at $2,300. It has soared by over 42% from its lowest level in 2023.
Gold is jumping for several reasons. First, there are signs that the US is heading towards a debt crisis, as I wrote in this article on the TLT ETF. The US public debt is growing at $1 trillion every 100 days and analysts expect that it will get to over $45 trillion in the next few years.
As a result, most analysts believe that gold will become the best alternative to the US dollar. That also explains why many central banks have boosted their gold purchases in the past few years. They are the likes of India and China.
Silver is often seen as the best alternative to gold. As such, many people are buying silver to take advantage of the rising gold prices.
Second, the Federal Reserve has insisted that it will start cutting interest rates this year. In a statement on Wednesday, Fed’s Jerome Powell said that the bank was still data-dependent. It believes that there is a room for at least two cuts this year.
Silver price is also soaring because of the improving manufacturing activity. A report published by the ISM this week showed that the US manufacturing PMI increased to 52.2 in March. It was the first time that the sector expanded since 2022.
Manufacturing activity in other countries like China and Japan is also improving. That is important because silver is an important industrial metal.
Most recently, silver inventory has been falling sharply this year. Also, the sector is expected to be in deficit this year. Data shows that the total silver supply in 2023 stood at 1.02 billion ounces against demand of 1.16 billion. If this happens, it will be the fourth year that silver will be in deficit.
Silver demand and supply
Looking ahead, the next important silver news will be the upcoming US nonfarm payrolls (NFP) data scheduled for Friday.
Silver price forecast
The weekly chart shows that the price of silver has been in a strong bullish trend in the past few months. It has soared from the December low of $17.55 to $27. This week, it made a bullish breakout above the crucial resistance point at $26.15.
That price was the upper side of the ascending triangle pattern. In most cases, this pattern is one of the most popular continuation patterns in the market. Silver failed to move above this price since April 2022.
It has also remained above the 50-week and 100-week Exponential Moving Averages (EMA). Therefore, the outlook for the metal is extremely bullish, with the next point to watch being at $30, its highest point in February 2021. The stop-loss of this trade is at $26.16.
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