Silver (XAG/USD) price has been in a strong bullish trend in the past few weeks as the US dollar index (DXY) slips and gold nears its all-time high. The metal was trading at $24.70, which was ~24% above the lowest level in March. As a result, the iShares Silver Trust (SLV) stock has also jumped to the highest level since April last year.
Silver and gold correlation
The main reason why silver price has jumped recently is its close correlation to gold and the inverse relationship to the US dollar index. Gold jumped to a high of $2,040, which was a few points below its all-time high of $2,070.
Analysts cite this performance to the ongoing demand for gold as countries move to its safety. In the past few months, central banks like those from Turkey, Russia, and Kazakhstan have all bought gold as concerns about the US dollar remains.
Another reason is that there are signs that the Federal Reserve is about to pause its interest rate hikes. As I have written before, central banks like the Reserve Bank of India, Australia, and Canada have all paused their interest rate hikes.
Therefore, most analysts believe that the Fed will hike interest rates jumped by 0.25% in its meeting in May and then hit a pause in the next sessions. This is also the message being sent by the bond market. The 10-year bond yield has dropped to 3.36% while the 5-year has dropped to 3.45%. A few weeks ago, these yields were above 4%.
Silver price and the SLV ETF tend to react to the actions of the Federal Reserve. In most periods, silver does well when the Fed is either easing or when it is planning to ease policy. In this period, the US dollar index (DXY) tends to decline. The index has dropped from a high of $115 in 2022 to a low of $101.
SLV ETF stock price analysis
SLV chart by TradingView
The daily chart shows that the SLV ETF stock has been in a strong bullish trend in the past few days. It has managed to move above the important resistance level at $22.56, the highest point in December, January, and February. The stock has invalidated the double-top pattern. It has moved above the 50-period exponential moving average while the Relative Strength Index (RSI) has moved above the overbought level.
Therefore, there is a likelihood that the SLV stock price will continue rising as bulls target the next key resistance at $25, the highest point in March last year.
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