- Summary:
- Silver price is on a path to $19 according to both technical and fundamental analysis. The price will likely continue to rise following gold price
Silver price (XAGUSD) declined slightly today as investors reacted to the ongoing risks about coronavirus. The metal is down by 0.30% while gold price is up by more than 1.52%. It is also a few points below its highest point since February 20. Even with the decline, the price of silver is bullish and will likely move to $19 in the next few weeks.
The bullish case for silver price
Silver is always put in the same cluster with gold. Furthermore, the two metals share a history that spans more than 5,000 years. Today, the two metals are used in the jewellery and investment industries. However, the main use of gold is in the investment scene since it is mostly bought by central banks and investors.
Many investors, too, buy silver because they believe that it has a unique store of value. Others buy the metal as a way of owning gold, which is usually more expensive. At the time of writing, silver price is trading at $17.900 per ounce while gold price is trading at more than $1700.
However, a large portion of silver is used in the manufacturing industry. It is used to make items like jewellery and kitchen accessories. It is also used in some large infrastructural projects such as in 5G. Therefore, with the world economy recovering, demand for the metal is set to improve. For example, data from Markit yesterday showed that manufacturing PMIs in Europe and the US is improving.
Another factor is that many governments are now investing in large infrastructure, as I wrote in my copper price piece. Some of the large projects will see more use for silver.
At the same time, silver price will be boosted by the falling supply, which has been induced by the pandemic. This will not be the first year that silver supplies has been falling. Indeed, mine production has been falling in the past four years.
In a recent note, analysts at Goldman Sachs raised their silver price forecast. In another report, those at Morgan Stanley said that the price would jump to $20 in 2020.
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XAGUSD technical forecast
The daily chart shows that silver price is trading above the 50-day and 100-day exponential moving averages. Also, the price is moving in a bullish trend as evidenced by the ascending pink trendline. As a result, XAGUSD is forming an ascending triangle pattern. This means that the price may continue rising as bulls struggle to pass the resistance level of 18.38. If it moves above this price, the next target will be 19.00, which is an important level since February. It is also an important psychological level.
On the flip side, a move below 17.000 will invalidate the bull thesis. This is an important level psychologically and also the lowest level since June 15.