Silver price (XAGUSD) spiked to a seven-year high of $23.20 yesterday as traders reacted to positive sentiments from analysts. A major bullish call came from Mark Mobius, the famous emerging markets investor, who made a case for investing in gold. While he did not mention silver, the price rose because it tends to follow gold.
Silver momentum eases
Today, silver price is down by more than 10 basis points as traders react to the rising tensions between the US and China. As I reported earlier, China and the US have been engaging in “cold war” tactics in the past few days. These tactics escalated today after China ordered the US to close its embassy in Chengdu.
Therefore, silver price has reacted to this because of its industrial nature. Unlike gold, most copper that is mined is usually used in the industrial sector. It is used to make mirrors, kitchenware, and solar panels. Indeed, in 2019, the amount of silver used in solar panel manufacture increased by almost 9%. Therefore, analysts believe that the new “cold war” will lead to low demand.
Silver demand expected to rise
Nonetheless, analysts believe that silver demand will increase. For one, the recently-passed EU recovery fund deal will go towards clean energy. Similarly, Joe Biden has unveiled a multitrillion dollar plan to move the United States to renewable energy in the next 15 years. Since he is rising in polls, analysts believe that he will beat Donald Trump in the November election. As such, they see demand for silver rising in the next few years.
Silver price technical forecast
On the weekly chart, we see that silver price (XAGUSD) has been on a strong upward trend. As a result, the price has moved above all the short and medium-term moving averages. Also, the RSI has jumped sharply to the highest it has been since September last year. Also, the two lines of the Stochastic are making a bearish crossover.
Therefore, this is a sign that the metal has become extremely overbought. As such, it is possible that the XAGUSD pair will decline in the short term. On the other hand, a move above $23.5 will mean that bulls are still in control.
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Silver price forecast
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