Silver Price Analysis: Trading above the four-year consolidation zone

• The price of Silver has risen and touched levels above the four-year consolidation zone below $30.00.
• Since then, XAG/USD has pulled back and the RSI is showing overbought on the weekly chart.
• There is a risk of a deeper correction, although a clear break above the consolidation would confirm further upside.

Silver (XAG/USD) has broken out of the tight range it has been trapped in since early 2023, ranging between approximately $21.00 and $26.00, and has risen into the four-year consolidation zone.

The precious metal has rallied rapidly over the past two weeks and has reached the key resistance level at the 2020 highs at $29.86. This is also the ceiling of a massive consolidation zone where the price of Silver has been trading up and down since 2020.

Since touching the zone's top earlier this week, XAG/USD has retreated to $28.60 in recent days.

Silver Weekly Chart

The Relative Strength Index (RSI) momentum indicator has entered overbought territory at 71.96, indicating that Silver may be peaking. There is a higher risk of a pullback and long position holders are advised not to add to their positions.

It is rare for the RSI to reach overbought on the weekly chart. The last time this occurred was at the August 2020 highs, over three and a half years ago. A significant pullback followed, bringing the price of Silver back down to $21.00, a drop of over 30%.

It is too early to say that the same will happen this time, but it is clear that there is a risk of a deep correction.

However, the short and medium-term trends are bullish, so there is also the possibility of a bullish continuation.

A decisive break above the 2021 high of $30.07 would confirm a continuation to the upside and a break from the four-year consolidation that Silver has been trading in. Expect this move to initially reach $32.40, where the old resistance lies.

However, if a correction were to occur, the exchange rate would be expected to fall to the support of the previous range highs at $26.00 initially; However, since the shorter time frame trends are bullish, a subsequent recovery could also occur.