
The surge in the Dollar Index has been putting significant pressure on silver since October. With rising yields and a tighter-than-expected rate path for 2025, silver has fallen more than 17% in just two months. However, since December, XAGUSD has established a strong base just above the lower line of its trend channel and is now attempting to regain lost ground. Several factors are worth considering for its future direction.
First, the gold/silver ratio has reached 1.5 standard deviations above its average. This suggests that silver likely has an advantage over gold in the coming weeks, even if both decline against the dollar. Historically, during bull markets in precious metals, silver tends to lead the charge, increasing the likelihood of continued upward movement.
Second, the current high yields show limited fundamental justification for the 10-year government yield to surpass 5% in the near future. This implies we may be near the peak in the medium term. A retreat in yields could create a positive environment for silver prices to recover.
Finally, there is the correlation between the stock market and silver. Contrary to popular belief, gold and silver share a positive correlation with the stock market. Over the past two years, this correlation has strengthened to 86.6%. As a result, traders looking to take long positions in silver should also monitor the performance of the S&P 500 closely.
(XAGUSD Daily Chart)

Silver has passed the key short-term resistance at 30.65 today. It is now crucial for the price to stay above the 30.60–30.65 zone. If this former resistance, now turned support, holds, upward momentum may continue. The next immediate resistance is at 30.95, but the next major ultimate target lies at 31.80.
Another potential strategy involves trading the divergence between silver and gold A pair trade of buying silver and selling gold could be more advantageous than taking a long position on silver alone until the gold/silver ratio return to 83.