Silver Price: ‘Silver is Trading at a record discount to gold’ – Goldman Sachs

Silver price (XAGUSD) rally is accelerating. A day after it crossed $20 per ounce, the price has gained by more than 2.40% and is trading at the highest level since August 2016. Gold price, too, has jumped by more than 0.45% while copper, platinum, and palladium prices have jumped by more than 0.50%. At the same time, analysts at Morgan Stanley believe that silver price will likely continue rising.

Potential demand pushes silver prices higher

Silver price is jumping potentially because of the EU recovery fund deal that was passed overnight. This deal matters for silver prices for several reasons. First, it has led to a jump in global assets like stocks, crude oil, and other metals by building confidence in the market.

Second, investors believe that demand for silver will continue to rise. As I have written before, silver is mostly an industrial metal, whose performance depends on the health of the global economy. Therefore, the deal means that demand could accelerate.

The third point is related to the second point. Part of the EU recovery fund deal says that most projects will go into green energy and 5G. Silver is used in some of these industries.

Fourth, silver price is rising because of increased demand in the investing market. That is mostly because silver is usually cheaper than gold and because its valuation has dropped significantly when compared to gold. Two months ago, I wrote that the silver to gold ratio had jumped to a 5,000-year high. Today, the ratio has dropped to about 90, which is a bit reasonable.

Similarly, investors have been piling into silver. In a note, analysts at Commerzbank wrote that, “Silver has been more popular than gold among investors for months now.” They cited a report that showed that inflows into the iShares Silver Trust ballooned to $675 million.

Finally, analysts have also helped pushed silver price higher. Yesterday, I wrote that analysts at Citi expected the price to reach $25 by the end of the year. On the same day, analysts at Morgan Stanley said that silver price would continue rising as investors follow gold. They wrote:

“Silver will continue to be pulled higher by the strong gold price and supportive financial conditions. As real demand also recovers through the second half of the year, this will add further impetus to silver’s price, narrowing the gold-silver price ratio slightly.”

On the same day, analysts at Goldman Sachs said, “Silver is currently trading at close to a record discount to gold, which should attract demand.”

Silver Price technical forecast

The weekly chart shows that silver price is trading at the highest level since August 2016. The price is above the 50-day and 100-day exponential moving averages while the RSI has jumped to the highest level since September last year.

Further, the XAGUSD pair has been in a bullish trend in the past seven consecutive weeks. Therefore, it seems like the metal has some great momentum, which means that bulls may continue pushing it higher.

On the flip side, a move below $18.62 will invalidate this trend. This price is the highest level since February this year.

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Silver Price forecast

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