Silver price wobbled today as investors continued to focus on the state of the global economy. Its price dropped by about 25 basis points while that of gold rose by more than 50 basis points.
The divergence between gold and silver is partly because the latter is also an industrial metal. Most of the silver that is mined is usually used in the manufacturing industries. This is not the case with gold, which is mostly an investment asset. Industrial production in the United States dropped to the lowest level in decades. This means that demand for raw materials like silver declined also.
Second, silver price could be reacting to the weak retail sales data released in the US and the UK. In the US, data showed that retail sales dropped by 8.7% in March while in the UK, sales dropped by 3.5%. As such, with retail sales falling, it means that the demand for silver-made products like jewellery and mirrors dropped as well.
The strong dollar is also another possible reason why the price of silver struggled. The US dollar index has risen since yesterday since many investors have rushed to its safety after the weak economic data released yesterday.
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Silver Price (XAGUSD) Technical Outlook
Looking at the four-hour chart, we see that the XAGUSD pair has been forming an equidistance channel since late last month. Today, the price hit the lower side of the channel, which is also along the 50% Fibonacci Retracement level. This Fibonacci connects the highest and lowest levels in March. Therefore, I expect the pair to maintain the bullish trend provided that it remains above the 50% Fibonacci level at $15.25.
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