Silver price (XAGUSD) is among the best-performing metals today. It is up by 1.15% and is trading at $27.88. That compares with the 0.20% decline of gold price and the 0.37% increase in palladium and platinum prices.
Silver price has had a relatively successful month. It has jumped by ~18% during the month. That is a better performance than gold, whose price has moved by less than 1%.
There are several reasons why the XAGUSD pair has moved up significantly this month. First, the US dollar has been relatively weak. In August, the dollar index has dropped by 0.80% and is currently trading at the lowest point in more than two years. Since silver is usually traded in dollars, its price tends to gain when the dollar strengthens.
Second, there are signs that a coronavirus vaccine will be approved in the next few months. This is a positive thing for silver price because of its industrial uses. A vaccine will lead to more demand for the metal as the economy reopens.
Third, recent polls show that Joe Biden will defeat Donald Trump in the upcoming election. Biden is relatively positive for silver price because of his plan to invest in renewable energy. This is usually a positive thing for silver because it of its usage in solar panels manufacture.
Still, it is worth noting that polls between Trump and Biden are tightening, which is partly the reason why the price of silver has been under pressure recently. On renewable energy, analysts also cite the recently passed $840 billion recovery fund in Europe.
Fourth, silver has been rising because of gold demand. Gold reached an all-time high of $2075 in August as traders reacted to lower interest rates in the US. In a statement last week, Jerome Powell reiterated that rates would remain this low for the next few years. Therefore, low rates tend to lead to higher gold prices. And since gold is more expensive than silver, most traders buy silver instead of gold to maximise returns.
Fifth, silver price has risen because of its lower valuation. As shown below, the gold to silver ratio, which is often viewed as a good way to value silver has been in a downward trend.
Gold Silver Ratio
Silver price forecast
The daily chart below shows that silver price is above the short and long-term moving averages. The price is also forming a triangle pattern, that is shown in purple. Also, the average true range, which is a good measure of volatility has started to drop. Therefore, the price is likely to break out higher, possibly in September. If it does, there is a possibility that it will test the August high of $29.85.
On the other hand, a move below the support at $23.46 will mean that there are more sellers in the market. That will possibly push the price lower, possibly to below $20.