Silver consolidates near 20-day SMA following Fed minutes
- Silver drops over 1% and consolidates between $36.00 and $37.00, hovering near 20-day SMA.
- Fed minutes reveal policymakers leaning toward only one rate cut this year.
- RSI points to bullish momentum, but $37.00 remains key breakout level.
Silver price registered losses of over 1% on Wednesday after the US Federal Reserve (Fed) unveiled its June meeting minutes, hinting that policymakers are eyeing just one interest rate cut, instead of the two priced in by investors. Although the Greenback was unchanged, the grey metal tumbled. At the time of writing, as the Asian session begins, the XAG/USD trades at $36.41, up 0.16%.
XAG/USD Price Forecast: Technical outlook
From a technical perspective, consolidation is the name of the game, with XAG/USD seesawing within $36.00 - $37.00 during the last five trading days, meandering around the 20-day Simple Moving Average (SMA) at $36.37.
Momentum is bullish, as indicated by the Relative Strength Index (RSI) at 57, which is poised to move higher. Hence, further XAG/USD upside is seen.
For a bullish continuation, XAG/USD must clear $37.00. A breach of the latter will expose the year-to-date (YTD) high of $37.31. Once hurdled, the next ceiling level would be $37.50 and $38.00.
On the flip side, if the Silver price drops below $36.00, the first support would be the 20-day SMA at $36.37, followed by the $36.00 figure. Once cleared, the next support would be June 30 cycle low of $35.42, ahead of the June 24 low of $35.29, ahead of the 50-day SMA at $34.58.
XAG/USD Price Chart – Daily
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
Christian Borjon Valencia
FXStreet
Christian Borjon began his career as a retail trader in 2010, mainly focused on technical analysis and strategies around it. He started as a swing trader, as he used to work in another industry unrelated to the financial markets.
