Silver price
Silver price (XAGUSD) is continuing its upward momentum today. It is up by more than 1.62% and is trading at $19.00 two days after it closed its best week in a few years. At the current price, the metal is at the highest price it has been since September 2019. It is also along Goldman Sach’s target for this year. In this report, we will look at the four reasons why the price of silver is gaining momentum.
There are four primary reason why the XAGUSD pair has been rising. First, precious metals have been on an upward trend in general. For example, gold price is now sitting close to its highest point since 2011. Similarly, palladium price is up to its highest level in history while platinum is close to its highest level in a few years. Generally, as the cheapest precious metal, silver tends to get more demand, especially from retail traders when other metals are rising.
Second, silver price is gaining because of the overall weaker dollar. The US dollar index, which measures the USD against a basket of currencies, is down by more than 0.25% today. Most of these losses are from the euro, which is up by 0.30%. We believe that the US dollar will be a bit weak in the foreseeable future because of the likelihood of negative rates in the US.
Third, the XAGUSD pair has been rising because of the improvement in the global economy. Generally, as a precious and industrial metal, silver price tends to do well in a period of global strength. This is because a better economy leads to more demand.
Fourth, silver price is rising because of the significant liquidity in the market. In recent months, governments and central banks have provided trillions of funds to the market. As a result, today, investors have trillions of dollars in dry powder. Some of these funds will go to the stock market and others in risk assets like silver. Indeed, recent reports suggests that inflows into silver ETFs has been rising.
However, as I wrote last week, some analysts are warning about how high silver price can continue rising. In another report, I wrote that the rising number of cases in the US presented a key risk for the metal.
Silver price is trading above $19 for the first time since September last year. The price is above the ascending red trend line. It is also slightly above the 50-day and 100-day exponential moving averages while the RSI has crossed the overbought level at 71. This means that it is overbought but not extremely overbought meaning that the price may now test $20.
On the flip side, a move below the support at 18.00 will invalidate this trend. This price is an important psychological level.