XAGUSD: Silver Price Rally Nearing its Top – Analyst

XAGUSD Silver Price
XAGUSD Silver Prices

Silver price is outperforming gold today as traders rush to safe-havens as the number of coronavirus cases rise. The metal is up by 0.77%, which is a better performance than gold, which is up by 0.30%. Gold is trading at the highest point since 2011 while silver is trading at the highest level since 2016. However, some are still cautious about the rally in silver.

Trader cautions against the silver price rally

In an interview with CNBC, Jeff Kilburg of KKM Financial, said that he believed that silver is now a sell with a target of $18. In his piece, he cited industrial demand, the weakness of the US dollar index, and the silver to gold ratio.

On industrial demand, Kilburg said that he expects it to move lower as the number of coronavirus cases rise in key markets like Australia and the United States. On the silver to gold ratio, he said that it is currently slightly below 100, which is still closer to its all-time high of above 130. In the past, the ratio has averaged about 50.

Kilburg is not the only analyst worried about silver price. In a long essay in the FT on Friday, John Dizard advised people not to invest in silver for the long term. He argued that the supply of silver will remain being vast for the near term. As a result, he does not expect the recent rally in silver will boost silver mining. But, he believes that the stored silver can easily be melted down when demand arises. He wrote:

“In recent years, the physical trade in precious metals has attracted too many compliance costs and scandals to be interesting to most banks. Even first-rank hedge funds have difficulty getting ready access to the physical market for gold. Silver? They’ll call back later.”

Silver price technical analysis

The daily chart shows that silver is trading at the highest level since February 20. It is also above the 50-day and 100-day exponential moving averages while the RSI is close to the overbought level of 70. The price is also above the ascending trend line that connects the lowest levels on May 7, June 25, and July 7. Therefore, in the near term, as I had written before, I expect the price to continue rallying as bulls attempt to test the next resistance at $19.00.

On the flip side, a move below $18.00 will invalidate this trend. This price is an important psychological level that is also along the ascending pink trend line.

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