Silver prices: short-term volatility and long-term opportunity?

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

Daily graph

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.

Weekly chart

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.