Silver Smashes Through $78.70 Resistance, Eyes Record $84.03 High
Spot Silver (XAGUSD) is sharply higher shortly after the mid-session on Tuesday. After spending a considerable amount of time straddling a key short-term retracement area at $77.05 to $78.70, the market smashed through the upper layer of resistance to reach an intraday high at $81.45. The market is now within striking distance of the record high at $84.03.
At 19:46 GMT, XAGUSD is trading $80.34, up $3.75 or +4.89%.
Investors Abandon “Buy the Dip” for Aggressive “Buy Strength” Mode
After last week’s dramatic closing price reversal top produced a massive profit-taking break, traders were faced with the choice, “buy value” or “buy strength”. Since there was no follow-through selling on Monday to confirm the reversal top, investors quickly switched to buy strength mode. Unwilling to wait for the “dip” into the “better” price, they are showing the willingness to take out offers. This has been the trading style for the last two months with investors eyeing much higher prices in the triple-digits because there is no true resistance.
Supply Shortage Meets Soaring Demand for Solar, EVs, and AI Infrastructure
Fundamentally, the market is still being supported over the long haul by huge demand for solar panels, electric cars, and AI-related infrastructure. But this demand is coming at a price because of a supply shortage. The current bull market is being underpinned by both of these factors, which is making investors comfortable buying both strength and weakness. They are getting more confident in the upside potential than the downside risks. This is fine as long as they understand that volatility is going to be enhanced as prices move higher and the dramatic sell-off we saw in late December could become the new normal.
ETF Demand, Fed Dovishness, and Geopolitical Tensions Fuel Rally
Tuesday’s rally incorporated all of the same factors that drove prices higher last year. In addition to the bullish supply/demand outlook, strong ETF demand and a dovish Fed outlook also helped boost prices. This week, additional support has been tied to safe-haven buying in reaction to the crisis in Venezuela and escalating turmoil in Iran.
For the most part, traders have been ignoring the firm U.S. Dollar and rising Treasury yields, but this disconnect isn’t really a surprise given the overwhelmingly bullish narrative.
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See all Silver forecastsFriday’s NFP Report Could Spark Breakout or Pause Rally Momentum
Economic data has also contributed to the new year rally. On Monday, it was reported that U.S. manufacturing activity fell again, raising the chances that the Fed will make more than one cut in 2026 and perhaps sooner than previously expected. Traders now have their eyes set on Friday’s U.S. Non-Farm Payrolls report. Weak payrolls numbers and a jump in the unemployment rate could send prices skyrocketing, but strength that could buy the Fed more time to assess the timing of the next rate cut could dampen the size and duration of the next rally.
More Information in our Economic Calendar.