The iShares Silver Trust ETF (SLV) remains close to the 13-year high reached at the beginning of the week amid heightened demand for the precious metal. Since early April, the ETF has surged by close to a quarter.
Investors have been seeking alternatives following gold’s historic rally. Besides, concerns over the US trade policy and the health of the economy are weighing on the US dollar while making silver and its derivatives less expensive for buyers holding foreign currencies.
Weaker US dollar bolsters silver ETF to 13-year high
Concerns over the US trade policy have left financial markets unsettled with investors increasingly shifting to alternative safe-haven assets. This cautious sentiment has increased the attractiveness of precious metals. Amid gold’s historic rallying, the likes of silver and platinum have emerged as top alternatives.
Besides, a weaker greenback makes dollar-priced assets like silver less expensive for buyers with foreign currencies. On Thursday, the dollar index, which tracks the value of the greenback against a basket of six major currencies, dropped to a three-year low before rebounding slightly in early Friday session. Amid concerns over the health of the US economy, the US dollar has plunged by over 10% year-to-date.
The solid US dollar selling has intensified after President Trump indicated that he will send letters to the US trading partners with “take it or leave it” unilateral tariff rates. While it is unclear if he will follow through with this pledge, the persistent concerns over the impact of the aggressive trade policy on the domestic and global economies continue to weigh on the US dollar while bolstering SLV silver ETF and other silver derivatives. Besides, the persistent uncertainties have increased the demand for silver as a safe haven asset.
Surge in gold/silver ratio points to steady price uptrend
As a measure of value, the gold/silver ratio measures the number of silver ounces needed to purchase one ounce of gold. The higher the ratio, the more silver ounces needed to get an ounce of gold.
Amid the ongoing geopolitical and economic uncertainties, gold price extended its gains on Friday to trade close to the all-time high of $3,500 hit in late April. At the time of writing, the precious metal was at $3,423.
Gold’s historic rallying has pushed investors to look for less expensive alternatives with silver and platinum benefiting from the spillover. Besides, the heightened demand for gold as a conventional safe haven has yielded a rebound in the gold/silver ratio.
At the start of the week, the ratio dropped to 90:1. Even at that level, it was still significantly high. Notably, the unsettling in the financial markets has bolstered it further to 94:1. These figures point to silver being undervalued relative to gold price. As such, it has an opportunity to rally significantly as the bulls strive to close in on the existing gap.
SLV silver ETF technical analysis
SLV silver ETF rallied to a 13-year high at the start of the week with the upward momentum pushing it to the overbought territory at an RSI of 72. With the subsequent corrective pullback, it has consolidated for the second session in a row while holding steady above the previously steady resistance zone of $32.
In the ensuing sessions, the range between Monday’s intraday high of $33.56 and the support zone of $32.11 will be worth watching. As the gold/silver ratio increases and silver’s investment demand surges, the bulls may have a chance to break the resistance along the range’s upper limit with $34.50 being the next target. Even with a corrective pullback, this bullish thesis will remain valid for as long as SLV silver ETF remains above the short-term 25-day EMA at $31.30.
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