Strategy
Buy at $26.80 with a stop below $25.60 for profit target $29.90
Technical View
Price recently hit a high of $30.03, surpassing the high of 7 August 2020 at $29.83. This was swiftly followed by a decline to a low of $25.87. This is also were the 20EMA lies in support. Price had earlier broken above this level on its sharp rally to $30.03. As price has managed to stay above this support, we remain hopeful that another test of $30.03 can happen again on the basis of a weak US dollar going forward. Price is also trending within a rising trend channel, which is also a sign of a bullish price trend
MACD remains bullish with both its line above the zero line. MACD is also moving higher, hinting of a bullish price trend ahead. Stochastic is in the middle of range and is neutral at the moment.
Fundamental View
The US dollar had rallied in the past 5 weeks on hopes that the US economy was on a stronger footing than its global peers and was likely to recover faster than its peers from the coronavirus pandemic. Doubts have started to creep in as US data is showing the US economy recovery had slowed or maybe stalled. Coronavirus cases may have peak and is getting better but the vaccine head start is not paying off with Europe and Asia also recovering from the pandemic.
In its recent FOMC meeting, the Federal Reserve had signaled some concern about the pace of the US economy recovery and will do all within its means to keep interest rate low to enable the US economy to recover. It also entails buying bond to keep yields lower. This is likely to keep interest rate near zero and yields low as well. This is likely to result in a weak US dollar which is likely to benefit Silver.
Fiscal policy is also likely to keep the US dollar weak. A US$1.9 trillion stimulus proposed by US President Joe Biden continues its path through Congressional approval. This big package is likely to weaken the US dollar. Some investors, including former Secretary of Treasury Larry Summers, are questioning the price tag and raised the risk of inflation. However, this package is likely to bring about an economic recovery and inflation which is likely to aid Silver price but weakened the US dollar.
With a vaccine available for coronavirus, hopes are high that the worst of the pandemic is past us. As the world recovers from the pandemic, a global economic recovery is also within expectations. A better economy is likely to boost silver prices as silver is an important industrial component.
