XAG/USD: QUARTERLY REVIEW

We present a medium-term investment review of the XAG/USD pair.

Since the beginning of the year, the “hawkish” policy of leading regulators has given way to a period of waiting for monetary policy easing. Against this background, real assets have come to the fore, and the most promising of them, as before, are metals. Gold prices are now correcting downwards, but silver prices, on the contrary, are actively increasing, approaching the annual high of 32.50.

Silver ranks second after oil in popularity among manufacturers due to its indispensability in “green technologies”: the production of electric vehicles, solar panels, and electronics forms up to 80.0% of industrial demand for raw materials. The second factor is protection against inflation, with which the metal has an inverse correlation. In addition, it is often used in conjunction with gold when creating long-term investment portfolios and is very popular among options traders due to its lower price. The third reason is the availability of the asset: it is the cheapest of the popular precious metals and is often used as a starting point for new investors. Also, the potential for an upward movement in silver relative to the 2010 peak is still very high compared to the same indicator for gold.

According to a report from the Chicago Mercantile Exchange (CME Group), trading volume in silver contracts began to increase in mid-May and peaked at 171.1K on May 20. An options position that often acts as a shadow driver due to its low initial cost and high profit potential, on May 17 and 20, there were a record 62.5K transactions and 55.6K positions. A strong increase in trading volumes in this category of derivatives is a signal of active price movement.

All of this data points to a continued positive trend in the long-term trend with the global target of the 2010 high of 50.00.

Technical indicators confirm the likelihood of continued growth: on the monthly chart, the price is held within the ascending channel with dynamic boundaries of 36.00–21.00, trying to reach the resistance line.

On the weekly chart, the highs from August 2020 and January 2021 have already been completely covered, which ensures the development of a further increase in the quotes.

The ascending channel has been forming for more than ten years, and until now, its resistance line has already been tested twice, but now it is quite possible to overcome it.

Let’s consider key levels on a daily chart.

The chart shows that the current increase is the fourth in an upward cycle since mid-February. After the correction ended at 30.00, the market has sufficient potential to update the current high of 32.50.

If the support level of 28.00 is reached, the upward scenario will either be canceled or delayed, and it is better to liquidate open buy positions.

Around ​​the August 2011 high of 41.50, there is the target zone, after reaching which, it is better to fix open buy positions.

Let's assess the trade entry levels on the four-hour chart.

The entry level for buy trades is at 32.50, the high of May 18, and after consolidating above it, the Trading tips may materialize.

Given the average daily volatility of the trading instrument over the past month of 89.0 points, a movement to the target zone of 41.50 will take approximately 64 trading sessions. With increasing volatility in metals, it may take 49 days.