A notable divergence between silver and gold is evident on the weekly chart. Silver has demonstrated resilience against steeper declines, holding above the 200-week moving average while is slightly below the 50-week moving average. This divergence raises intriguing questions about the relative valuations of the two precious metals.
Interestingly, silver's price appears to be well-supported by the EURUSD exchange rate, potentially indicating an overvaluation of gold at present. However, if expectations of an interest rate cut by the Federal Reserve in March intensify, both silver and gold could surge, accompanied by an uptrend in EURUSD. Barclays said that the Fed should cut in March and at every other meeting thereafter.
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Create account Try a demo Download mobile app Download mobile appAt present, the key technical support for silver lies within the range of USD 22.5 to USD 23 per ounce. Without a substantial dollar rally or yield decline, silver at these levels could appear attractive for those who believe it is undervalued compared to gold.
Source: xStation5
As observed, the gold/silver price ratio remains well above its key moving averages. This ratio has persisted above long-term averages for nearly a decade, although it seems likely to converge towards lower levels in anticipation of monetary policy easing, as it did in 2020. Considering gold's current price of around $2000 per ounce, silver should ideally trade within the $25 to $26 per ounce range.
Source: Bloomberg Finance LP, XTB
Silver also seems well valued looking at the 1-year and 5-year averages. The previous period in which silver was close to these averages for a longer period of time was 2018. However, silver then experienced a correction. We believe that the market is at a different stage now, closing to the first rate cut in the US that should be net positive for previous metals.
Source: Bloomberg Finance LP, XTB
