Silver price (XAGUSD) is bouncing back today as traders continue to watch out the rising risks emerging around the world. The metal is up by 0.50% and is trading at $18.76, which is close to yesterday’s high of $19.02. Other metals are also rising, with gold and copper price rising by more than 0.10%. However, the question is whether these risks will be a good thing for silver prices or negative.
Coronavirus cases rising globally
The biggest risk for silver price is the rising number of coronavirus cases in most countries. Yesterday, the US confirmed more than 57,000 new cases, which was slightly below the previous day’s increase of 62,000.
In Hong Kong, city officials have ordered schools closed because of a new wave of the virus. In South Africa, the government confirmed the highest number of new infections yesterday. The same trend is happening in many countries around.
So, can silver price do well at a time of high coronavirus infections? The common thesis is that silver price will follow gold upwards if the number of cases continue to rise. That is because gold tends to be a safe haven in times of crisis. While there is some truth in that, the truth is that demand for silver by investors tends to be relatively weak.
Consider the fact that the biggest silver ETF is significantly below that of gold. Also, consider that unlike gold, silver is usually an industrial metal.
There are two risks for silver prices when the number of coronavirus cases jump and the world returns to lockdown. First, it will affect demand for silver-made products like mirrors, tableware, and other kitchen products. Second, while supply will be affected because of mine closures, there is ample supply of silver in storage that can easily be melted.
As I wrote the other day, some analysts have started to caution against silver after the recent rally.
XAGUSD technical forecast
Silver price is trading at 18.76, which is higher than the intraday low of 18.50. On the daily chart, the price is above the 50-day and 100-day exponential moving averages. The price is also above the ascending trend line that is shown in red below. Meanwhile, the RSI has been climbing, and is slightly below the overbought level of 70. Therefore, in the short term, the XAGUSD pair is likely to retest the previous high of 19.
On the flip side, a move below 18 will invalidate this trend. This is an important psychological level that is also along the ascending trend line.
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Silver price technical forecast
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