Silver prices (XAG/USD) rallied more than 5.5% on Wednesday to touch the $77 mark, as renewed optimism for a peace agreement between the US and Iran sent the US Dollar and Treasury yields lower. The move marks silver’s largest intraday gain in several weeks, testing a key technical barrier.
The sharp decline in the US Dollar, a primary driver for the move, came after Axios reported that Washington and Tehran are moving closer to a potential agreement. This eased immediate inflation concerns and shifted trader sentiment toward potential Federal Reserve rate cuts later in the year, providing support for non-yielding precious metals like silver and gold, which also jumped 2% on the news.
From a technical perspective, the advance met initial resistance at the 50-day Simple Moving Average (SMA), currently located at $77. Despite the strong intraday momentum, with the Relative Strength Index (RSI) improving to 53, a subdued Average Directional Index (ADX) reading of 12 suggests the underlying trend remains weak, pointing to potential consolidation, according to an analysis by FXStreet.
The key technical and psychological hurdle for silver remains the 100-day SMA near $80. A decisive close above this level could trigger a short squeeze, attracting further inflows from momentum-following funds. According to analysis from ZeroHedge, CTA strategies currently show a structure that could lead to accelerated buying if an upward breakout is confirmed.
Speculative Positions Remain Low Despite Rally
A notable feature of the current market is the relatively low level of speculative involvement. Data on managed money positions show that speculative long positioning in silver futures remains depressed, a holdover from the recent multi-month consolidation period. This lack of crowded ownership could provide more room for prices to run if the $80 resistance is breached.
Furthermore, the silver volatility index (VXSLV) has receded from its recent highs, making options strategies less expensive. While the Gold/Silver ratio remains a key gauge for relative value, the current setup in silver points to a potentially asymmetric opportunity should momentum build. On the downside, initial support is seen in the $70.00-$71.00 zone, with the 200-day SMA at $63.00 acting as the primary long-term floor.
AI Demand Provides Industrial Floor
Beyond the speculative and monetary drivers, silver's fundamental picture is supported by its critical role as an industrial metal. The ongoing build-out of artificial intelligence infrastructure requires significant amounts of silver, which has the highest electrical conductivity of any metal. This demand provides a strong underlying floor for prices.
The industrial demand component is reflected in broader market strength, with Statistics Canada recently reporting that Canadian exports of metals rose 24% year-over-year in March. While geopolitical news and US dollar dynamics are driving short-term price action, the long-term demand from sectors like AI and solar energy remains a key structural support for silver.
This article is for informational purposes only and does not constitute investment advice.
