Silver Price Forecast as the Gold Silver Ratio Drops to 81

Silver price held steady on Thursday as the market reflected on the latest Fed minutes. The XAG/USD price jumped to a high of 21.61, which was the highest level since November 16. It has jumped by more than 22% from the lowest level this month. 

Fed turns dovish

Silver prices rose modestly as investors reacted to the latest minutes by the Federal Reserve. These minutes showed that most officials favored shifting to smaller rate increases in the next few months. At the meeting, the bank lifted rates by 0.75% for the fourth straight time. Therefore, analysts expect that the bank will hike by 0.50% in December and then shift to smaller 0.25% increases in the first quarter.

Silver tends to do well in a period when the Fed turns dovish. This explains why silver has dropped by more than 20% from its highest point this year at a period since the Federal Reserve has hiked rates by 400 basis points this year. The dollar index (DXY) price plunged to $105, which was about 8% below the highest point this year.

Meanwhile, the closely-watched gold silver ratio has come under pressure recently. It dropped to 81.27, which is about 17% below the highest level this year. The ratio shows the number of multiples gold is trading in relative to the price of silver. In most cases, when the ratio moves to 80, it is a signal that silver is relatively inexpensive to gold. 

Silver price also rose slightly even as industrial demand eased as China lockdowns rose to the highest level this year. These lockdowns continued as the Covid-zero strategy continued. This is important since China is one of the biggest buyers of silver.

Silver price forecast

The daily chart shows that the XAG/USD price has been in a bullish trend in the past few days. It managed to move above the important resistance level at $21.28, the highest point since October 4. It has jumped above the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has been in a bullish trend. Silver moved above the 38.2% Fibonacci Retracement level.

Therefore, silver price will likely continue rising as buyers target the key psychological level at $24. A drop below the key support at $21.2 will invalidate the bullish view.