Silver Price Forecast: XAG/USD extends rally above $36 on value-buying, US NFP in spotlight

LONDON (June 6) Silver price (XAG/USD) refreshes over a decade high to near $36.20 on Friday. The white metal performs strongly as market experts quoted it a value buy, citing its secular underperformance in comparison with Gold.

Silver has underperformed gold over a long period of time and looks significantly undervalued. This appears to be attracting investors, analysts at Commerzbank said. They added that the silver market is expected to be in a “supply deficit for the fifth consecutive year”. However, the deficit is expected to be “significantly smaller” as “demand will likely decline and supply to increase”,

On the global economic front, trade worries between the United States (US) and China have eased after a post from President Donald Trump on Truth.Social signaled that he had a direct conversation with Chinese leader XI Jinping and trade talks between the two will be smooth in the future.

“The call lasted approximately one and a half hours, and resulted in a very positive conclusion for both countries.” Trump wrote.

Theoretically, resolving global economic tensions diminish demand for safe-haven assets, such as Silver. However, the demand for Silver as an industrial input will increase, given its application in various sectors, such as mining, Electric Vehicles, and semiconductors, etc.

In Friday’s session, investors will focus on the US Nonfarm Payrolls (NFP) data for May, which will be published at 12:30 GMT. The labor market data will influence market expectations for the Federal Reserve’s (Fed) monetary policy outlook.

Higher interest rates by the Fed for a longer period bodes poorly for non-yielding assets, such as Silver.

Ahead of the US NFP data, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, gains ground and rises to near 99.00.

Silver technical analysis

Silver price advances to near $36.20 after breaking above the key resistance plotted from the October 22 high of $34.87, which will act as a key support now. Advancing 20-day Exponential Moving Average (EMA) near $33.85 suggests that the near-term trend is bullish.

The 14-day Relative Strength Index (RSI) jumps above 70.00, indicating a strong bullish momentum.

Looking up, psychological level of $40.00 will be the major resistance for the Silver price. On the downside, the October 22 high of $34.87 will act as key support for the asset.

FXStreet