Silver price has staged a strong recovery in the past few days as the gold/silver ratio and the US dollar index slipped. The XAG/USD price rose to a high of 21, which was the highest point since October 6 of this year. It has jumped by more than 18% from the highest point this year.
Silver and gold have had a close relationship for centuries. They are both precious metals that are highly regarded globally. As such, the two tend to react to the monetary policy decisions of the United States. They also have an inverse correlation with the US dollar. In most cases, silver price tends to rise when the US dollar falls.
The gold/silver ratio is an important metric that is used to identify the relationship between the two metals. It usually signifies the value of gold compared to that of silver. The ratio crashed to a low of $80 on Tuesday, which was the lowest level since April. It has crashed by more than 16% from its highest point this year. It now means that one ounce of gold is equivalent to 80 ounces of silver in dollar terms.
The gold/silver ratio’s crash has also coincided with that of the US dollar index. The DXY index has slipped from the year-to-date high of $115 to about $110. This decline happened after the latest Fed decisionand the mixed non-farm payroll (NFP) data. It will next react to the upcoming American inflation data scheduled for Thursday.
Silver price will also react to the US midterm elections. In theory, a win by Democrats will be a positive thing for silver because it will reinforce investments in clean energy. Silver is used modestly in the manufacture of some solar panels.
Silver price forecast
The daily chart shows that the silver price has performed well in the past few days. In this period, it has managed to move above the 50-day moving average. It has also retested the first resistance of the standard pivot point. Silver is also slightly above the ascending trendline shown in purple.
Therefore, it is clear that the rebound has found a strong barrier at $20. A move above this level will lead to more gains as buyers target the second resistance at $22.61. A drop below the support at $19.95 will invalidate the bullish view.