XAGUSD by Swissquote — TradingView

Silver’s rise is the result of a combination of strong fundamental factors, including a weak dollar in the currency market, falling interest rates, explosive industrial demand but obvious supply difficulties, and a highly tense geopolitical environment in multiple regions around the world.

The strength of this combination of fundamental factors cannot be seriously questioned.
However, we cannot ignore an equally obvious market reality: vertical price increases are unsustainable in the long term. Sooner or later, a correction phase will occur, and silver is no exception.

Without trying to predict the timing of this correction, some technical observations can be made:

• With the $95-$100 area reached, the XAG/USD pair achieved long-term technical targets based on measures of the old trading range between $5 and $50 that had developed over decades.
• Institutional investor position data shows that profit taking is gradually beginning

From a very long-term chart perspective, the current move shows all the hallmarks of market optimism. Monthly momentum is overextended, with the Relative Strength Index (RSI) approaching levels historically associated with major tops in the silver market. This type of pattern does not necessarily imply an immediate or sharp reversal, but it clearly highlights the imbalance between price and its underlying trend.

In addition, the previous major resistance area between $48 and $50 has been significantly broken and has now been transformed into a long-term strategic support area. As long as the price remains above this level, the primary bullish structure remains in place.

It’s also worth noting that the pace of the recent gains reduces the likelihood of entering a prolonged sideways phase. Historically, such vertical accelerations in silver have tended to be accompanied by sharp and rapid corrections, or timed corrections characterized by months of high volatility and erratic moves.

Finally, the macroeconomic environment must be closely monitored. Any reversal in the direction of the dollar, an unexpected rise in real interest rates or a slowdown in industrial demand could trigger an adjustment phase. Conversely, the continuation of the de-dollarization process and the escalation of geopolitical tensions may delay this phase, but will not completely cancel it.

Bottom line: The main technical objectives have been met and the overall trend remains bullish, but the reward-risk ratio becomes decidedly less attractive in the short to medium term. Therefore, more prudent and proactive risk management is needed at this stage

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