By Giles Coghlan, Chief Currency Analyst at HYCM
Gold vs silver
Precious metals, silver, and gold continue to have a very strong fundamental bias to the upside. Low-interest rates, extra stimulus expected from major world economies, and risk positive markets on vaccine hopes are all keeping gold and silver heavily supported. The rise of silver has been extremely strong since the signal of the broken weekly trend line from last Friday. However, despite recent gains, there could be much more to go for silver.
Silver has more obvious room to the upside than gold does
If you look at silver you can see that the current price is around half of what the record high has been. The record high has been around $50. This means that silver has plenty of more room to go higher. The fundamental picture is also very strong with Goldman Sachs seeing a ‘near-perfect environment for silver’ and Citi is ‘very positive’ noting the steady silver investment demand. Furthermore, Bloomberg notes that inflows in silver-backed ETF’s are now running at well over 1000 tons a month. The upside looks set and expects buyers from pullbacks unless market conditions change from today’s environment.
Remember that silver benefits from both safe-haven bids and its demand as an industrial metal. Silver is used in anything from mobile phones to solar panels.
Where will silver buyers re-enter?
Firstly, look at the 4-hour chart at the top and the breakout of the ascending weekly trend line. Any return to $19.20 should find buyers.
A second option is to look for a monthly close above the trend line marked. Some longer-term buyers will enter at market or a slight pullback towards $19.20. If we get a close above $19.20 at the end of the month this is one area on the charts to watch.