Silver prices: short-term volatility and long-term opportunity?
Gold and silver prices generally move in tandem, due to common factors, but they also have their own specific properties. With silver, the risk is higher, but so is the potential return.
Like gold, silver prices move in line with the US dollar, and in the medium to long term they could benefit from a fall in the greenback, linked in particular to the end of the cycle of monetary policy tightening in the United States, with investors expecting the Fed to take a pause on Wednesday 14 June.
In the shorter term, however, although the markets are euphoric, with expectations of a more accommodative monetary policy and the prospect of a soft landing for the economy, the speed with which interest rates have been raised in the United States, economic data and liquidity risks should lead to a return to reality in the equity markets.
This outlook is likely to lead to a sharp rise in the US dollar, which is still seen as a safe haven by investors, and to a major correction in the silver price, before a return to the long-term uptrend, as was the case during the subprime crisis.
Bear in mind that the volatility of the silver price is greater, offering a greater opportunity for return, but also a much greater risk. What is more, the ounce of silver has never returned to touch its all-time high reached in 2011, close to $50, while the price of gold has traded above $2,000 on three occasions since 2020 and is currently still close to its all-time highs.
Silver price analysis
The price of silver is continuing the upward trend that began last September, and should reach new highs in the next few years. In the shorter term, however, the risk of a correction is increasing.
For this to happen, investors would have to take into account the risk of a recession in the global economy, leading to a return to the dollar. Graphically, such a scenario could lead to a sharp acceleration in the downtrend and a return, initially, to the technical zone at $20.70/21.
A break of the latter should lead to a sharp fall in the price of silver, reflecting major fears on the markets and for the economy.
In 2008, during the subprime crisis, while gold and silver prices had risen strongly in previous years, the sharp rise in the dollar from the summer onwards led to a 55% fall in silver prices and a 31% fall in gold prices over the following six months.
Subsequently, the uptrend resumed in a big way, taking gold and silver to new all-time highs, notably as a result of the fall in the dollar.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
Speculate on commodities
Trade commodity futures, as well as 27 commodity markets with no fixed expiries.
- Wide range of popular and niche metals, energies and softs
- Spreads from 0.3 pts on Spot Gold, 2 pts on Spot Silver and 2.8 pts on Oil
- View continuous charting, backdated for up to five years
Live prices on most popular markets