Silver price (XAGUSD) is in a holding pattern as traders reassess whether the dollar strength is here to stay. Today, the US dollar index has soared by more than 0.35%. It is in its second consecutive day in the green.
Silver price best month in a decade
The price of silver is coming from its best month in a decade. In July, the price soared by more than 35%, becoming the best-performing metal in the month. Gold, its richer cousin, rose by just 8% while the S&P 500 rose by just 3%.
The surge in XAGUSD in July was because of several factors. The most important was the weakness of the US dollar. Indeed, the US dollar index declined by almost 4% in July as investors rushed to other currencies. Second, the weaker dollar prompted a sharp demand for gold, which is viewed as a safe haven. But, with gold price being at historic lows, investors attempted to capture its promise by buying silver, which is a bit cheaper.
Third, as an industrial metal, silver price tends to react to demand and supply dynamics. In July, as the world economy recovered, analysts believed that demand for silver would increase. It would rise at a time when the supply is being challenged.
XAGUSD technical analysis
The daily chart below shows that silver price rally has hit a wall after it reached a high of $26 last week. The price is now forming what seems like a bullish pennant pattern, which is usually bullish for an asset. At the same time, the price is above the ascending trend line that is shown in pink below.
Interestingly, volatility of the price has increased. The Average True Range has surged to the highest level this year while the Historic Volatility has surged to the highest level since March this year.
Therefore, based on the bullish pennant pattern, silver price is likely to continue soaring. On the flip side, a move below $20 will invalidate this trend. This is an important psychological support level.
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Silver price forecast
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