Silver's upward trend continued this week, but after reaching the key level of $60/ounce, prices began to show signs of pullback, directly reflecting the current extremely overbought state of the market. Silver traded at $58.476/ounce during the session, a daily increase of 2.39%. Market concerns about its future direction have not diminished, especially the risks of a sharp reversal and parabolic fluctuations, which remain the focus of attention.



Looking at this week's trading, while silver prices have risen slightly, the resistance at the $60 mark is evident. A simple glance at the technical charts clearly reveals how overbought the market is. This necessitates a degree of caution at the current level, but it also confirms the old adage: bull markets always rise amidst apprehension. Those familiar with silver trading know that such impulsive rallies actually harbor hidden risks, and losses can easily occur if one is not careful. After all, similar situations have occurred many times in history, where silver prices often quickly reverse and fall back after a rapid surge.

It's worth noting that silver is currently at a historical high, and this high level has persisted for approximately 10 to 12 days. Against this backdrop, the market naturally wonders: will a phase of correction occur? From a conventional market logic perspective, if a correction does occur, buying support is likely to emerge in the $54 to $55/ounce range. This range previously acted as strong resistance, and according to market memory effects, once a resistance level is effectively broken, it can easily become a support level. Conversely, if silver successfully breaks through and holds above the $60 mark, the price will likely enter a parabolic upward trend. However, the problem is that such extreme price movements in silver will inevitably trigger a chain reaction sooner or later. Typically, when this trend starts to spiral out of control, there may be a surge in silver prices while other assets weaken, and ultimately, silver itself may also face a significant correction.

For investors, a more realistic risk is that if they buy silver at a high level like $60, their positions will face significant unrealized losses if the price subsequently pulls back to around $54. Therefore, in the current market environment, controlling position size is crucial. Although there is always an impulse in the market to heavily invest in the hope of a short-term wealth leap, experience shows that such impulsive upward trends are often followed by sharp corrections, and blindly chasing high prices with heavy positions is simply not worth the risk.

In essence, the current volatility in the silver market is closely related to a core market reality: the book value of silver ounces on the futures market has long exceeded the deliverable quantity on physical exchanges, a situation that has persisted for many years. Against this backdrop, short-term pullbacks may actually tempt some investors to anticipate a potential explosive upward move. From a market operation perspective, now is not the ideal time to chase this trend, but there is no significant shortage of silver supply in the short term.


(Spot silver daily chart source: EasyTrade)

Based on commonly used technical analysis rules, it's generally advisable to wait for prices to fall below the 50-day moving average before considering any trading opportunities. The $50 level is currently below this level, making it a price point worth watching. It's important to clarify that while an ideal short-selling window will inevitably emerge in the silver market in the future, the current market situation clearly doesn't yet present a suitable time to implement short-selling strategies.