SLV ETF rally gain steam amid strong silver demand

Silver price has rallied by about 42% year-to-date compared to gold’s 38%. In recent months, its investment demand and safe-haven appeal has surged as financial markets continue to grapple with geopolitical tensions and economic uncertainties. Indeed, the buying pressure has bolstered SLV  ETF to 2011 levels.

Even with these solid fundamentals, investors are now seeking clarity in the upcoming  US CPI data. As an asset that is sensitive to the market sentiment and industrial demand, higher-than-expected figures may intensify stagflation concerns. 

Silver’s dual role to sustain bullish momentum

About a week ago, silver price rallied above $40 an ounce for the first time since September 2011. It has since held steady above this crucial support-turn-resistance zone, trading at $41.09 at the time of writing. Subsequently, the SLV silver ETF has remained within its months-long bullish channel despite the recent consolidation. 

Notably, silver’s dual role as a precious and industrial metal makes it sensitive to industrial demand and the market sentiment. On the one hand, the persistent geopolitical and economic uncertainties have sustained the demand for precious metals and other safe haven assets. 

However, investors seem to be shifting their concern from these uncertainties. Indeed, while the fear & greed index is at a neutral of 51, Dow Jones, S&P 500, and Nasdaq Composite all ended Tuesday’s trading session at a fresh record high. This explains the week-long consolidation mode observed in SLV ETF and silver price. 

Meanwhile, the silver market is digesting China’s CPI figures released early on Wednesday. Notably, the country’s consumer prices dropped beyond analysts’ expectations in August. According to the National Bureau of Statistics, CPI fell by 0.4% YoY compared to the forecasted contraction of 0.2%. 

However, with the exclusion of the volatile food and energy prices, core CPI rose by 0.9% YoY; its highest level since February 2024. The underlying inflation is largely due to temporary factors as opposed to a concrete improvement in the persistent supply/demand imbalance. Economists have ramped up calls for the Chinese government to offer fiscal support amid mounting economic strains. 

As the top consumer of silver, China’s slowing domestic demand and weakening exports growth are curbing the white metal’s price gains. However, positive long-term fundamentals are set to maintain steady support for the dual-purpose metal.      

In the ensuing sessions, the US CPI data is set to impact silver price movements. Amid a slowing labor market, higher-than-expected CPI figures may heighten stagflation concerns. This might test the resilient silver bull market even as its safe haven appeal sustains its uptrend.  

iShares Silver Trust (SLV) Technical Outlook 

SLV silver ETF has held steady within the 5-month-long bullish channel as seen on its daily price chart. With the persistent buying pressure, the asset will likely remain above the crucial resistance-turn-support zone of $35, at least in the short term. 

In addition to trading above the 25 and 50-day EMAs, the higher highs and higher lows substantiate this bullish thesis. However, a corrective pullback is likely. In the previous session, it reached the overbought territory at an RSI of 70 before pulling back to 62 as at the time of writing.

In the immediate term, the range between the 14-year high hit on Monday at $37.84 and the support zone of $36.55 is worth watching. Even with a further pullback, SLV silver ETF will likely hold steady above the previously strong resistance zone of $36. On the flip side, attracting more buyers may help break the current resistance zone to hit a fresh 14-year high at $38.25.