Silver Price Analysis: Bearish engulfing pattern forms, eyes on $70
- Bearish engulfing pattern signals a reversal after a failed rally attempt.
- RSI in bearish territory confirms downside momentum gaining strength.
- Break below $70.86 exposes $70.00 and $68.28 support levels.
Silver (XAG/USD) tumbles over 3% on Monday as the US Dollar rises on safe-haven demand amid escalating US-Iran tensions in the Strait of Hormuz, as the US Navy embarks on Donald Trump’s 'Operation Freedom'. At the time of writing, XAG/USD trades at $72.74 after reaching a high of $76.00.
XAG/USD Price Analysis: Technical outlook
After extending its gains last Friday, XAG/USD erased those gains, forming a ‘bearish engulfing’ chart pattern, which, once confirmed, would open the door for further downside.
Momentum, as measured by the Relative Strength Index (RSI), is bearish, leaving bullish traders exposed to further losses if Silver dips below the latest cycle low of $70.86, the April 20 swing low. If surpassed, the next stop would be the $70.00 milestone, followed by the April’s month low of $68.28.
Looking upwards, XAG’s buyers must clear the $73.00 mark if they want to remain hopeful of higher prices. Once hurdled, the next stop would be the May 4 high of $76.98, followed by the $78.00.
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
Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.
