Silver Price Forecasts: XAG/USD pars losses but remains trading in range
- XAG/USD’s bounces up from two-month lows below $60 but remains capped below a key resistance area around $62.40
- Precious metals have drawn support from the pullback in US yields after soft US Nonfarm Payrolls data.
- The risk-off mood amid the bond market turmoil is keeping the US Dollar supported
Silver (XAG/USD) trades above $61.30 on Monday’s early European session, after bouncing from two-month lows around $59.70 on Friday. The precious metal has drawn some support from the mild pullback in US Treasury yields after the soft US labour data released on Friday, but remains below a key resistance area at $62.40, which leaves the broader bearish trend intact.
US employment creation slowed down significantly in September, according to the Nonfarm Payrolls report released on Friday, and the Unemployment rate increased unexpectedly. These figures practically confirm that the Federal Reserve (Fed) will pause its monetary tightening cycle in October, which sent near-term yields lower and gave some breather to the battered precious metals.
The turmoil in bond markets, however, seems far from over, as borrowing costs surge across the globe amid concerns that high Oil prices will keep boosting inflationary pressures for quite some time. Against this background, US yields’ retreat remains contained, which is likely to keep Silver rallies limited.
Technical Analysis: Previous support around $62.40 area is now a key resistance
XAG/USD shows a mild recovery on Monday but remains below a previous support area, around $62.40, that is also the neckline of an extended Head & Shoulders pattern. Momentum indicators in the 4-hour chart are neutral. The Relative Strength Index (14) is around the 50 midline, and the Moving Average Convergence Divergence (MACD) remains slightly positive but Silver is likely to need additional impetus to break above the mentioned resistance area.
A rather unlikely break of the $62.40 level would expose the September 25 high, just above $65.00, ahead of the resistance area around $68.00, which capped bulls several times in September. Bearish attempts, on the other hand, are likely to be tested around Friday's lows, at $59.69 ahead of the late August and early September lows at the $56.60 area.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
Author
Guillermo Alcala
FXStreet
Graduated in Communication Sciences at the Universidad del Pais Vasco and Universiteit van Amsterdam, Guillermo has been working as financial news editor and copywriter in diverse Forex-related firms, like FXStreet and Kantox.
