Silver price forecast: here’s why XAG is rising and what next

Silver price continued its strong bull run, reaching its highest level in over a decade as investors piled into precious and industrial metals. XAG jumped to 40.4 on Monday morning, crossing the important resistance level at $39.51, its highest point in June.

Why silver price is soaring

Silver price jumped as investors rotated back to industrial and precious metals. Copper, often seen as a bellwether for the global economy, jumped to $10,000 a ton, continuing a trend that started a few months ago. 

Similarly, gold price has risen in the past five consecutive days, reaching a high of $3,478, its highest level since April and a few points below the all-time high of $3,496. 

Silver price jumped as investors boost their bets that the Federal Reserve will start cutting interest rates this month. Jerome Powell, the Fed Chair, has already hinted that the bank will cut in September, citing the worsening labor market. 

The most recent numbers showed that the economy added 73,000 jobs in July. This increase led to a jump in the unemployment rate, which rose to 4.2%.

The labor market has deteriorated in the past few months, with job additions averaging 35,000 in May and June, marking the worst performance since the COVID-19 pandemic. 

Gold and precious metals like silver do well when the Fed is slashing interest rates as this lowers the performance of the US dollar index (DXY).

Silver has also jumped as demand from American investors rise. Data shows that the iShare Silver Trust (SLV) had inflows in the last three consecutive week. 

It added $25.6 million last week after adding $263 million the week before. Its total inflows jumped to $1.2 billion this year, bringing its total assets to over $18.7 billion. 

Most importantly, as an industrial metal, silver also benefited from the recent Chinese data. A report released on Sunday showed that the manufacturing PMI rose to 49.5 in August, up from 49.4 in the previous month. 

While the PMI remained at the contraction zone, it has made some improvement in the past few months. This is happening at a time when the industry is in the fifth year of supply deficits.

Silver price technical analysis 

The daily chart shows that silver has been in a strong bull run in the past few months. Its rally has accelerated after soaring in the last three consecutive days.

Silver price has moved above the key resistance level at $39.52, its highest level on July 23rd this year.

It has moved above all moving averages and tested the strong pivot reverse point of the Murrey Math Lines at $40.62. 

Top oscillators like the Relative Strength Index (RSI) and the MACD indicators have continued soaring, a sign of strong momentum.

Therefore, silver will likely continue rising, with the next key resistance level to watch being at $46.87, the extreme overshoot level, which is 16% above the current level. A drop below the support at $39.5 will invalidate the bullish forecast.

Read more: July PCE inflation climbs to 5-month high levels: will the Fed still cut rates?