Silver price is up by more than 1.10% today as investors react to a bullish call by Goldman Sachs on Friday. The metal is trading at $17.92 while gold price is trading at $1,762, which is close to its highest level since 2012.
Goldman hikes silver forecast
In a statement on Friday, Goldman Sachs said that gold prices would jump to $2000 in the next 12 months. In the same note, the analysts said that silver price would hit $22 per ounce in the next three years. The Wall Street firm expects the price of silver to average $19 this year and $21 in the coming year.
The thinking behind Goldman’s idea is that currency debasement would attract more people to alternative assets like silver and gold. The analysts said:
“Policy uncertainty aside, we believe that debasement fears remain the key driver of gold prices in a post-crisis environment such as this.”
Uncertain times for silver
Silver price is also rising because of the improving business environment. Recently released data from Europe, the United States and China has signalled that the world economy is recovering. For example, in the United States, retail sales jumped at the fastest pace in decades while industrial production emerged from the deepest contraction since 1940s.
These numbers matter because unlike gold, silver is an industrial metal. Most of the silver that is mined is sold to manufacturers who use to produce jewellery and silverware. At the same time, the ongoing second wave risks shutting down mines, which will lead to more supply cuts.
Silver price faces an uncertain times because of inflation. Most analysts believe that silver and gold are special hedges against inflation. The problem is that the world is seeing the lowest rate of inflation in decades. In fact, many countries, especially those in Europe are going through deflation.
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Silver price technical analysis
The silver price rose to an intraday high of $18.00, which is an important resistance level. On the four-hour chart, the price is above the 50-period and 100-period moving averages. Also, the price is above the 23.6% Fibonacci retracement level. Most importantly, the price appears to be forming a bullish pennant pattern, which is more evident when you look at the hourly chart. This means that the price may continue to rise as bulls attempt to move above $18.00.
On the flip side, a move below $17.45 will invalidate this trend. This price is along the 23.6% retracement and the 100-day EMA.