Silver (XAG/USD) saw a decrease of over 2%, trading near $90.40 during the Asian session. This downturn followed an all-time high of $93.90 earlier in the week.
Pressure on the metal came as the US held back from imposing tariffs on critical mineral imports. This decision pointed to the US’s reliance on such minerals for various industries.
Market Adjustment And Technical Analysis
Last week’s rally in silver was driven by fears of potential tariffs. However, the market adjusted as expectations rose that the Federal Reserve would maintain interest rates later this month.
Silver’s current technical analysis shows it trading at $90.63. The 50-hour Exponential Moving Average (EMA) at $90.06 shows an upward trend, supporting short-term momentum.
However, the Relative Strength Index shift suggests slowing bullish momentum. Resistance stands at the recent high of $93.90, with potential declines if prices fall below previous lows of $86.19 and $83.62.
Silver is often used as a value store and investment, impacting its price. Industrial demand, geopolitical factors, and interest rates influence silver’s value. Silver prices often mirror gold’s movement due to their similar status as safe-haven assets, with the Gold/Silver ratio indicating value perceptions.
Market Strategy Amid Volatility
The recent pullback in silver from its all-time high is a direct response to the tariff news, which removed the immediate reason for its sharp climb. We should anticipate continued volatility as traders who bought on the tariff rumour are now exiting their positions. This creates choppy conditions, making short-term directional bets risky.
With the bullish momentum stalling for now, this is a good time to consider strategies that profit from a consolidation phase. Selling out-of-the-money call spreads with strike prices above the recent $93.90 high could be a prudent move. This allows us to collect premium while the price finds its footing, benefiting from the high implied volatility left over from the recent rally.
However, the underlying reason for silver’s strength remains firmly in place. We saw industrial demand, especially for photovoltaics, set records through 2024 and 2025, a trend driven by global green energy initiatives. The US government’s statement confirms silver’s strategic importance, suggesting that securing long-term supply is a priority, which is bullish for the metal.
The Federal Reserve holding interest rates steady is a short-term headwind, but the broader monetary easing campaign isn’t over. We can use this dip to plan for the next move up, perhaps by selling cash-secured puts near the January 15 low of $86.19. This either generates income if the price stays above that level or allows us to enter a long position at a discount.
Looking at the bigger picture, the Gold/Silver ratio has steadily compressed from its 2024 average of around 80:1, reflecting silver’s outperformance due to its industrial necessity. A pause in silver’s ascent is normal after such a strong run. We view any further weakness towards the mid-$80s as a chance to position for the next leg higher, driven by fundamentals that have been building for the past two years.
