Silver Price May Test $30 This Year

Key Insights

• Silver gained strong upside momentum as gold/silver ratio declined from 84 to 78.50.
• The Fed may soon make its last rate hike in this cycle, so demand for precious metals could grow as traders prepare for future rate cuts. 
• A combination of positive catalysts could push silver towards the $30 level. 

Silver has recently rallied towards the $25 level as gold/silver ratio declined below 79. The significant decline in gold/silver ratio served as the main catalyst for silver’s rally as there were no big moves in gold markets.

Back in May, I highlighted a bullish scenario for silver, which implied a gold/silver ratio of 75. At this point, it looks that gold/silver ratio is ready for a serious test of the important support near the 78 level. A successful test of this support level will push gold/silver ratio towards the yearly lows at 75, which will be bullish for silver. From a big picture point of view, gold/silver ratio is moving towards the levels that were seen at the start of the year.

The Fed may soon make its last rate hike in this cycle, which will be bullish for precious metals as traders will start to prepare for future rates cuts in 2024. High interest rates are bearish for precious metals that pay no interest. However, demand for precious metals stays strong despite rate hikes, which shows that fundamentals are bullish.

From the technical point of view, silver’s attempts to develop an upside trend were stopped in the $25 – $26 range in 2022 and 2023.  A combination of positive catalysts, including the continuation of the current trend in gold/silver ratio and the end of the rate hike cycle, could push silver above $26. Such a move will likely trigger a buying wave that may push silver towards the 2020 highs near the $30 level.

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