Silver price (XAGUSD) is gaining momentum today, a day after gold price crossed the important $2,000 resistance. The price is up by more than 1.78% while gold is up by just 1.35%. Even with the sharp increase, analysts believe that silver has more upside to go. Silver is trading at $26.53.
Gold Silver Ratio has Been Falling
A few months ago, we wrote that the gold to silver ratio had jumped to the highest level in more than 5,000 years. At the time, the ratio was at 120:1, which was higher than its normal average of about 25.1.
This ratio is usually followed closely because it shows the amount of gold that can be bought with silver. Today, the ratio has dropped to 75, which means that you need 75 ounces of silver to buy one ounce of gold.
Therefore, while silver price is a bit higher on a historic standard, the ratio sends a message that the price has more to go. Also, since gold is much expensive than silver, more people seeking exposure to metals rush to silver.
For example, if you have $1,000 in a period when metals are surging, you can make more money investing in silver than in gold. Indeed, this is one reason why silver tends to be more volatile.
Gold Silver Ratio is at the lowest level since 2018
Analysts optimistic about XAGUSD
Silver price is also raising because of the latest calls by analysts. In an interview with CNBC, Michael Hsueh, an analyst at Deutsche Bank said that he sees the price outperforming gold in the near term. He cited the metal’s role in the industrial sector and the rising demand as countries rebuild their economies. He said:
“Silver has a much higher industrial component to it. So, much higher component of silver supply demand in industrial consumption. And in an environment where we see the global economy recovering, that’s another reason to buy silver.”
Other analysts, too, are bullish about silver. In a statement last week, analysts at Citi cited the $860 billion recovery fund by the Eurozone and the rising prospects of a Joe Biden victory. According to EU documents, most of the funds will go to green projects. Biden, too, has launched a multi trillion green energy agenda. Therefore, since silver is used in solar panels manufacture, analysts believe that its price will continue rising.
Silver price outlook
Where do we start? On the weekly chart, we see that silver price has climbed in the past nine consecutive weeks. Interestingly, the surge started out slowly before picking up steam in the past three weeks.
The price is above all the short, medium, and long-term moving averages while the RSI and the two lines of Stochastics have moved to the highest level in years. Therefore, I suspect that the price will continue rising as bulls target the next resistance at $27 and even $30.
On the flip side, a move below $21.25 will invalidate this trend. This price is along the highest level on July 2016.