Silver price declined slightly today as traders took a breather following the recent rally that saw it reach the highest level since February. Other metals like copper, platinum, and palladium that saw a big bounce yesterday also weakened today.
Analyst predict a big jump in silver prices
Even as the market seems to be pausing on silver prices, some analysts believe that the rally is not yet over. An analyst calling himself, Dumb Wealth, wrote a highly bullish piece explaining why the price is set to jump to $62 per ounce. As of this writing, silver is trading at $17.
In the peace, Dumb Wealth, who covers precious metals and other macro events based his argument on three things.
First, he talked about the Federal Reserve balance sheet, which has expanded to more than $6 trillion. In comparison, the balance sheet was less than $500 billion before the past financial crisis. Worse, there is a possibility that the balance sheet will reach $10 trillion by the end of the year. This is what Jerome Powell was saying when he talked about supporting the economy.
What is extraordinary about the current QE is what the bank is buying. In the previous QE, the Fed was mostly buying government debt. Today, Powell is buying corporate bonds from the fallen angels; junk bonds.
Second, he predicted that inflation will soon be here. While the western world is going through deflation right now, he argued that the unlimited money being printed by central banks would lead to inflation. He also pointed that the brewing trade tension between the US and China would lead to inflation. Silver is often used as a hedge against inflation.
Third, he predicted that silver price would soar because of its valuation. On this, he talked about the gold-silver ratio, which recently jumped to the highest level in more than 5,000 years. He argued that based on the historic data, the price of silver should be about $62.
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Silver price technical outlook
On the daily chart, silver price (XAGUSD) reached a high of 17.55 yesterday. The price is now trading at 17.04, which is slightly above the 50-day and 100-day exponential moving average and inches below the 78.6% Fibonacci Retracement level. As shown below, this breakout happened after forming a bullish pennant pattern. Therefore, I expect the price to continue rallying as bulls remain in control. Still, it is possible that the silver price will form a pennant or flag pattern.
On the other hand, a move below 16.17 will invalidate this prediction. This price is along the 61.8% Fibonacci retracement level.
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