Silver Video 01.06.20.
Gold/Silver Ratio Remains In The Downside Trend
Silver continues its upside move as the U.S. dollar remains weak while gold/silver ratio is in a downside trend.
The U.S. dollar is losing ground against a broad basket of currencies, and the U.S. Dollar Index is testing the 98 level. The U.S. dollar is under pressure as investors focus on the recovery and choose riskier assets.
This trend positively impacts silver as industrial demand is a major component of the total demand for silver.
Gold also enjoys investor support and stays firmly above the key $1700 level. It looks like demand for safe haven assets has shifted from the U.S. dollar to gold and silver.
Gold/silver ratio continues to decrease and is near 95. Before the coronavirus hit the world economy, gold/silver ratio was below 90. A return of gold/silver ratio to pre-crisis levels is a major part of the bullish thesis for silver.
At this point, the market setup is favorable for silver as it enjoys the benefits of global market optimism and weaker U.S. dollar. The main risk for silver is the return of the market worries which may boost the American currency and raise doubts about the industrial demand for silver.
Silver has recently breached the resistance at $17.50 and gained significant upside momentum. Earlier, I wrote that silver should face resistance at $18.15, but I’d note that an additional resistance has emerged at $18.40.
In case silver gets above $18.40, it will head towards the major resistance level at $19.00. It will not be easy for silver to get above $19.00 without some stabilization ahead of the test of this key level since RSI is coming into the overbought territory.
On the support side, the nearest support for silver is located at $17.50, which previously served as a resistance level. In case silver manages to settle below $17.50, it will likely gain additional downside momentum and head towards the major support level at $17.00.
In general, the upside trend for silver remains strong, and it has good chances to ultimately get to the test of the $19.00 level. The key thing to watch in the upcoming trading sessions is the gold/silver ratio which can have more room for downside.
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This article was originally posted on FX Empire
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