Silver is trading at approximately $38.50, recovering from last week’s dip, and is just shy of the $39.13 high reached in July. Key resistance levels are identified at the psychological $39.00 level and the July 14 high, with support around the $38.00 and $37.50 zones.
Momentum indicators, including the RSI near 70 and ADX rising, suggest a bullish bias. The silver price is supported by a weaker US Dollar, pressured by easing Treasury yields. It shows renewed strength, holding above 50- and 21-period EMAs, signalling buying interest.
The RSI sits near the overbought zone at 70, and the ADX at 20 indicates strengthening trend momentum. For a stronger push, a breakout above the $38.80-$39.00 resistance range is needed. Essential support levels are $38.00 and $37.50, while resistance is at $39.00 and $39.13.
On the daily chart, silver is in an uptrend within an ascending channel since April. Strong support is provided by the 21-day EMA at $37.18 and the 50-day EMA at $35.92. Continued movement above the $37.00-$37.50 region maintains the bullish outlook, with potential for a breakout toward $40.00.
We believe the current bullish momentum presents a clear opportunity for derivative traders. The sustained price action above key moving averages, coupled with a weakening U.S. Dollar following softer-than-expected May inflation data, reinforces our positive outlook. The critical move to watch for is a decisive break and hold above the $39.13 resistance level.
For those anticipating a continued rise, we see value in purchasing call options with strike prices at or above $40.00, especially if the price clears the July high. Recent Commitment of Traders (CFTC) reports show that money managers have already been increasing their net-long positions, suggesting institutional conviction behind this upward trend. This strategy allows traders to capitalize on a potential sharp rally toward the next psychological benchmark.
Alternatively, selling out-of-the-money put options with strike prices near the $37.50 support level could be an effective strategy to collect premium. This approach benefits from both a rising price and time decay, backed by the strong support provided by the 21-day EMA. The ascending channel in place since April gives us confidence that these lower levels will hold.
The fundamental picture supports this technical strength, as industrial demand remains exceptionally strong. The Silver Institute forecasts that demand from the photovoltaic industry alone will account for 20% of total silver consumption this year, creating a solid demand floor. This underlying consumption helps insulate the price from minor speculative pullbacks.
While indicators suggest strong buying interest, the Relative Strength Index nearing 70 advises a degree of caution against entering prematurely. We would prefer to see a confirmed breakout above the $38.80-$39.00 range before committing to new aggressive positions. This patience will help avoid being caught in a potential short-term reversal or consolidation period.
Historically, once silver clears significant multi-year highs, it can experience periods of rapid price appreciation, similar to the rally seen in 2010-2011. A sustained move above the current resistance could signal the start of a more significant leg up. Therefore, we are positioning for a breakout while using the identified support zones to manage risk.
