Here’s why the silver and the iShares SLV ETF are surging

By:
on May 17, 2024
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  • The iShares Silver Trust ETF has surged hard this week.
  • It rose to its highest level since February 2021, a 72% increase from 2020.
  • Silver is doing well after this week’s US inflation data.

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The iShares Silver ETF (SLV) surged above a key resistance level as the price of silver soared to $30 for the first time in over 11 years. It has jumped by more than 72% from its lowest level in 2022, making it one of the best-performing metals in the industry.

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Silver and gold have jumped sharply because of the rising expectation that the Federal Reserve will start cutting interest rates in the second half of the year. Most leading indicators like housing starts, building permits, retail sales, and consumer confidence have shown that the economy is slowing.

Wage growth has slowed, which could help to slow the inflation rate in the US. Data released earlier this month revealed that the wage growth slowed to 3.9% in April, its lowest reading in over two years.

Another report released this week revealed that the headline Consumer Price Index (CPI) slowed to 3.3% in April while the core CPI dropped to 3.6%. These numbers signaled that the recent reflation trends are ending.

Silver also jumped in line with other precious and industrial metals. Gold soared to over $3,900 and is slowly approaching its all-time high. Copper has also spiked to a record high as hopes of more demand and constrained supplies rose.

Meanwhile, there are signs that the Chinese economy is doing well. Data released earlier Friday shoed that industrial production rose by 6.3% in April from 6.1% in the previous month. The unemployment rate has dropped to 5.0%. 

Another driver for the silver surge is that new mines have not been discovered lately. When they are found, the permitting process is taking longer than it did in the past. 

SLV ETF forecast

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SLV chart by TradingView

In my last article on the iShares Silver Trust, I noted that it had formed an inverse head and shoulders pattern. In most cases, this is one of the most bullish signs in the financial market. 

On the weekly chart, it has moved above the neckline of this pattern between $24 and $25. It has also remained above the 50-week and 100-week Exponential Moving Averages (EMA).

Most notably, the fund has jumped to the crucial resistance level at $28, its highest level in February 2021. Also, the Relative Strength Index (RSI) and the Stochastic Oscillator have all risen to the overbought level.

Therefore, the outlook for the SLV ETF has continued soaring, with the next level to watch being at $30.

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