Silver price gained more than 4% on Tuesday, trading near $59 at the time of writing and breaking above the descending channel that has capped prices since May.
The move lifted the metal away from an eight-month low near $55. Renewed hopes of US-Iran diplomacy cooled oil-driven inflation fears, giving precious metals room to recover.
US-Iran Diplomacy Hopes Take Pressure Off Silver
Silver closed Monday at $56.40, up 0.90%, before extending gains on Tuesday. The recovery began after Tehran signaled it remained open to negotiations with Washington, which paused the oil rally that had driven Brent crude up roughly 30% from its July lows.
That matters for silver because expensive oil feeds inflation, and persistent inflation strengthens the case for higher interest rates. Markets now price an 80% chance of a December Federal Reserve hike, up from 73% a week ago. Higher rates typically hurt silver, since the metal pays no yield and lost ground as a hedge during the conflict.
However, the structural backdrop remains supportive. The Silver Institute projects a sixth consecutive annual supply deficit in 2026, estimated at 46.3 million ounces, alongside a 20% rise in physical investment demand to 227 million ounces. Silver also remains about 45% higher than a year ago despite falling 13% over the past month.
Silver Price Escapes Two-Month Descending Channel
The daily chart shows a bearish long-term structure, with consecutive lower highs and lower lows since silver’s record high above $121 in January. From May until this week, the price trended down inside a parallel descending channel.
On Tuesday, silver broke out above the channel’s upper boundary, reaching an intraday high of $59.25. Breakouts from descending channels often signal trend reversals, and the measured target sits at the 0.618 Fibonacci retracement level near $68.88.
That level, close to $68, also acted as long-term resistance earlier this year. Reaching it would imply roughly 16% upside from current prices. Meanwhile, a stronger dollar remains the main external risk to the setup.
Double Bottom at $55 and RSI Divergence Back the Recovery
Momentum indicators strengthen the bullish case. Silver price bounced twice from the support zone around $55, which aligns with the 0.786 Fibonacci retracement at $54.51. Together, the two bounces form a potential double bottom, a pattern that frequently marks the end of a downtrend.
Moreover, the second low came with a bullish divergence on the Relative Strength Index (RSI). The price made a lower low while the RSI made a higher low, suggesting fading sell pressure. The RSI currently sits in neutral territory near 47, leaving room for further upside before overbought conditions appear.
The bullish outlook depends on the breakout holding. A daily close back inside the channel would invalidate the pattern, and losing $55 could expose the long-term support at $49.81. Traders who favor gold over silver may wait for that confirmation first.
If diplomacy progresses and the $55 floor holds, silver could climb to the $68 Fibonacci target. Otherwise, a return of oil-driven rate fears may send the metal back toward its yearly lows.
Source: BeInCrypto
