Crispus Nyaga

Crispus Nyaga is a Nairobi-based trader and analyst. He started trading more than 7 years ago as a student. He has published in several reputable websites like The Street, Benzinga, and Seeking Alpha. He focuses mostly on G20 currencies, commodities like Crude oil and Gold, and European and American large-cap companies.

In recent weeks, gold has been one of the best-performing precious metal. Its price has continued to soar, and just last week, the metal reached a six-year high of $1,400. The reasons for this are that investors believe that the Fed may start and continue slashing interest rates as the US economy goes through challenges. When the Fed cuts rates, the expectations are usually that the dollar will decrease, which  may leads to a higher price of gold. In the past two days however, the price of gold has eased a bit following the Friday’s jobs numbers. The data showed that the US created more than 224k jobs in June. In reaction, the dollar index rose slightly and the price of gold declined as well.

Silver is commonly known as gold’s poor cousin. This is because, while silver is a precious metal, it trades 100x below the price of gold. Unlike gold, silver has some industrial use, with most of it being used in the manufacture of tableware, mirrors, currencies, and jewelry. The metal is mostly mined in countries like Mexico, China, Peru, and Russia.

In recent days, the price of silver has lagged that of gold. In the past one year, while gold price has risen by more than 13%, that of silver has declined by more than 3%. The reason for this is that investors tend to move to silver in most periods when they believe that interest rates will fall. This is because gold is the dominant metal in the previous metals market. In a recent article in Seeking Alpha said that:

Gold is a much more popular metal, and it is a far bigger market. So, naturally investors begin pouring capital into gold in the early stages of a bull market. However, interest usually picks up for silver in the mid to later stages of a bull market cycle because silver is much cheaper, begins to look underpriced, and due to it being a much smaller market, once demand picks up prices typically skyrocket.

On the one-year chart below, the XAG/USD pair reached at 15.05 level, which is along the 50% Fibonacci Retracement level. The pair  reached below the 50-day and 25-day moving averages while the RSI has moved from the overbought level of 70 to a low of 50. The pair will likely continue moving lower in the short term before moving higher.

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