Silver price forecast: RSI divergence points to potential rebound
Silver price up 27.9% in 2024, poised for further gains on industrial demand
Silver price has experienced a remarkable 27.9% price increase since the beginning of 2024, with an overall yearly gain of 34.9%.
Despite a pullback in the 4th quarter, the market for silver remains supported by strong industrial demand and a favourable long-term outlook.
Silver price dynamics (November-December 2024). Source: TradingView.
This week, silver extended its downtrend from a five-week high of $32.32 to test the Fibonacci 0.786 level at $30.20, which acted as a key support. This level briefly cushioned further losses, allowing silver to stage a short rally. However, the price has continued to edge lower during today’s Asian and European sessions, with silver now trading around $30.40. While these recent declines suggest short-term weakness, the Relative Strength Index (RSI) shows signs of divergence, with higher lows and a rise towards 50. This technical development suggests that silver may soon reverse its downward trend.
Silver price outlook: Fed rate cut and industrial demand to drive further upside
The upcoming Federal Reserve meeting could also be a pivotal event for silver. Analysts expect a potential interest rate cut of 25 basis points, which could reduce the opportunity cost of holding non-yielding assets like silver. This, combined with inflationary pressures that have surpassed expectations, could make silver more attractive to investors.
In addition to this, robust demand, coupled with limited supply growth, presents a strong foundation for silver’s long-term price prospects. While global production has remained relatively flat since 2014, demand remains strong, especially from industrial sectors which now account for roughly 55% of global silver demand, with solar technology alone consuming over 200 million ounces annually.
Therefore, while short-term fluctuations may persist, silver's fundamentals continue to support a positive price outlook. With silver's technical indicators showing potential for a rebound and industrial demand remaining strong, traders will keep a close eye on key price levels, particularly the $30.20 support and the broader bullish trend.
Silver price falls below the critical 100-day Exponential Moving Average (EMA). Despite attempts at recovery, resistance at the 0.618 Fibonacci retracement level caps upward movement.
