Silver price (XAGUSD) pair is down by more than 1.5% today as traders reflect on the surging number of coronavirus cases in the United States. Other metals, too, have moved lower, with gold price down by more than 1%.
The price of silver is trading at $18.91, which is below yesterday’s high of $19.37. Gold price, on the other hand is trading at $1,794. Still, the metal’s price has outperformed gold and the S&P since March.
Why silver price has been rising
As I have written before, silver is a unique metal. Unique because many investors view it as a store of value, like gold. Also, unique because of its industrial nature. Most silver that is mined is used to manufacture items like mirrors and kitchenware. Therefore, its price tends to move according to demand and supply.
Therefore, before we look at the reasons why silver price has been a key outperformer in the past few months. First, there is a perception that demand will increase as the world economy recovers. Second, supply has been constrained by the rising number of coronavirus cases in major mining countries. Third, the weaker dollar has helped push the price higher.
Finally, there has been demand from institutional investors. According to the Wall Street Journal, assets in BlackRock’s iShares Silver Trust have ballooned by almost $2.45 billion this year.
So, why is the price of silver falling today?
I believe that the rising number of coronavirus cases in the United States is the biggest reason why silver price is falling today. As I wrote earlier today, situation in the US has become so bad that some states have reinstated the previous stay-at-home orders.
At the same time, some countries that were quick to reopen have also seen a rise in new cases. These include Hong Kong, Australia, and South Africa. Therefore, investors are afraid that growth that they were anticipating will not happen after all.
Also, investors could be worried about oversupply. While gold is mined in a handful of countries, silver is mined in many countries like China, Australia, and Russia.
Still, there is a possibility that the rally will continue. In a report published yesterday, Andrew Hecht, a commodity analyst said:
“Silver has tremendous upside potential. The price action in gold is a sign that a new all-time high is on the horizon. “
Silver price forecast
Silver price is trading at $18.90, which is slightly below yesterday’s high of 19.36. On the daily chart, the price is trading above the 50-day and 100-day exponential moving averages. It is also above the ascending trend line that is shown in red below.
Therefore, I expect the price to continue rising as bulls target the next support level of $20. However, a move below $18.34 will invalidate this trend. This price is along the highest point June 1 and 2 and July 1.