Silver price (XAGUSD) is up by more than 2% today. The price is in its second consecutive day of gains and is in the highest it has been since Tuesday last week, when it dropped by more than 15%. It is trading at $28, a few points below its highest point of $29.90.
Like gold, silver price is mostly rising because of the weaker US dollar. The US dollar index has dropped by more than 0.35% today as the USD has dropped against all currencies in the index. The currency has weakened partly because of concerns about the US recovery. Although recent economic numbers have been relatively strong, analysts have questioned the strength of this recovery.
There are two main reasons for this. First, the number of coronavirus cases in the country remains relatively high. In total, the country has confirmed more than 5.44 million cases and more than 170K deaths. Yesterday, the country confirmed more than 37,000 new cases, which is still a substantial amount.
Second, congress has struggled to pass a stimulus legislation. In fact, members of congress went to their August recess without reaching an agreement, putting millions of Americans at risk.
Silver price and the US dollar have an inverse relationship. That is because the metal is mostly priced in the currency.
However, there is another risk for silver prices. In a statement yesterday, the US commerce department announced that the US will bar companies, including foreign ones, to sell American-made chips to Huawei, the giant Chinese technology company. This risks escalating the trade tensions between the two superpowers, which will hurt demand.
Silver price (XAGUSD) forecast
The daily chart below shows that silver price reached a multi-year high of $29.73 two weeks ago. Last week, the price declined to a level that is slightly higher than the 38.2% Fibonacci retracement level. This retracement was drawn by connecting the highest and lowest levels this year. The price is above the 50-day and 100-day exponential moving averages.
Therefore, I suspect that silver price will continue rising as bulls target the multiyear high of $29.73. On the flip side, a move below last week’s low of $23.38 will invalidate this trend.