Silver price starts approaching attractive levels

After the huge price spike and silver frenzy of January, the precious metal has faded into the background somewhat. All the attention in financial markets went to AI stocks, which posted extreme returns in recent months. Now, however, we're seeing chip stocks correct sharply.

There are a number of reasons for this:

• Investors are taking profits after a period of sharp price gains.
• The market has doubts about the extent to which tech giants can recoup their enormous AI investments in the short term.
• The rise in bond yields means the cost of capital for these investments is increasing, raising the bar even further.
• The Iran war is creating uncertainty about the US central bank's interest rate policy, which may need to be stricter in the coming months than had been hoped.
• With Kimi-K3, China has once again brought an extremely strong AI model to market that appears able to compete with the top models from the United States. As a result, the market is once again worried about a "DeepSeek moment."

Although the silver price is still searching for a bottom, this could offer opportunities for a capital rotation — that is, a phase in which investors take profits on their AI investments and look for assets that are more favorably valued.

Silver is becoming more attractive to investors

In theory, silver has become considerably more attractive to investors in recent weeks. The chart below contains a number of signals suggesting the silver price is in an interesting zone.

First, we see the silver price moving towards the downward trendline that runs from the local bottom of 6 February. So far, silver has found support at that point every time. Now, however, that line coincides with the double top from October and November, shown by the horizontal white line.

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At the same time, the Relative Strength Index (RSI, bottom panel) formed a higher low, while the price itself posted a lower low in July. This tells us that silver's deeper price bottom was accompanied by weaker selling momentum. This kind of development generally means sellers are losing conviction.

Ideally, as a silver investor, you'd want to see a reaction around the white lines in the chart, followed by a reclaim of the 21-day exponential moving average at $60, shown by the yellow line.

Of course, the silver price could always fall further, since certainty doesn't exist in the financial world. The only thing you can do as an investor is choose moments when the risk-reward balance is more in your favor. That situation appears to be emerging now, provided you believe in the future of silver as both a monetary and an industrial metal.

An important detail is that bond yields need to cooperate. The resumption of the Iran war has created uncertainty about the US central bank's interest rate policy. This week, the United States delivered two cooler-than-expected inflation prints, which would normally lead to easing.

That wasn't the case here, however, because those inflation prints covered a period when the war in Iran played less of a role and the oil price was lower. In the meantime, the oil price has climbed back to around $85 a barrel, and there's now mainly uncertainty about the outcome of the September and October rate meetings.

As a result, the silver price is likely to remain held back until there's more clarity on interest rates. After all, higher rates are bad for precious metals, and for silver in particular. Unlike the US dollar, silver pays no interest, while higher rates also make investment in the physical build-out of AI infrastructure more expensive.

That, in turn, also puts the brakes on the investment cycle that matters for silver as an industrial commodity. For this reason, we can say that a few interesting weeks to months have opened up for silver and the precious metals complex as a whole. Prices are starting to become more attractive for investing in silver, but the macroeconomic backdrop still needs to cooperate too.