Silver Price Analysis: XAG/USD bulls have the upper hand while above 100-hour SMA/$31.00

Silver lacks any firm intraday direction and oscillates in a range on Wednesday.
The overnight sustained breakout through a trading range favors bullish traders.
Dips towards $31.00 could be seen as a buying opportunity and remain limited.

Haresh Menghani FXStreet

Silver (XAG/USD) struggles to capitalize on the previous day's positive move and seesaws between tepid gains/minor losses during the Asian session on Wednesday. The white metal currently trades around the $31.25 region, nearly unchanged for the day and just below a fresh weekly peak touched earlier today.

From a technical perspective, the overnight breakout through a multi-day-old trading range could be seen as a fresh trigger for bullish traders and support prospects for additional gains. Moreover, oscillators on the daily chart are holding in the positive territory and suggest that the path of least resistance for the XAG/USD is to the upside. Hence, any meaningful dip might still be seen as a buying opportunity and remain limited.

Meanwhile, the trading range resistance breakpoint, around the $31.00 round figure, now coincides with the 100-hour Simple Moving Average (SMA) and should protect the immediate downside. A convincing break below might prompt some technical selling and drag the XAG/USD below the $30.75 area, towards testing the $30.55-$30.50 strong horizontal support, which should act as a key pivotal point for short-term traders.

On the flip side, the Asian session peak, around the $31.45 area, now seems to act as an immediate resistance, above which the XAG/USD could then surpass an intermediate hurdle near the $31.75 region and aim to reclaim the $32.00 mark for the first time since May 30. Some follow-through buying should pave the way for additional gains and a move towards challenging the YTD peak, around the $32.50 region touched in May.

Silver 1-hour chart

Silver FAQs

Why do people invest in Silver?

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.

Which factors influence Silver prices?

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.

How does industrial demand affect Silver 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.

How do Silver prices react to Gold’s moves?

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

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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