Silver Price Analysis: XAG tests $86.00 as rally gains momentum
- XAG/USD soars toward a two-month high as bullish momentum remains intact.
- Break above $90 opens the door to test $100.
- Close below the 100-day SMA risks a pullback toward $77.19 support.
Silver (XAG/USD) price rallies over 7% on Monday, clearing key technical resistance at $83.05, the April 17 daily high, and also the $85.00 psychological figure, which opened the door towards the $86.00 per troy ounce handle, its highest level in the last two months.
XAG/USD Price Analysis: Technical outlook
Price action shows the white metal is exploding higher, with buyers aiming to challenge $90.00. Bullish momentum increased sharply as the Relative Strength Index (RSI) spiked nearly to overbought territory, an indication that further upside is expected.
Overhead, resistance is the March 10 daily high at $90.03. The move above will expose the March 2 swing high of $96.62 and open the door towards challenging the $100.00 figure.
Downwards, traders could challenge $83.05, a previous resistance turned support. A breach of the latter and a move to the 100-day Simple Moving Average (SMA) at $80.22 is on the cards. Below here, the next support is the 50-day SMA at $77.04.
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.
(This story was corrected on May 11 at 21:50 GMT to say that a break above $90 opens the door to test $100, not $82.12 and $83.05)
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.
