Silver Price Analysis: XAG/USD retakes $31.00 mark, seems poised to climb further
- Silver attracts dip-buyers on Tuesday and moves back closer to over a two-month top.
- The setup favors bullish traders and supports prospects for a further appreciating move.
- Any downfall towards $30.00 could be seen as a buying opportunity and remain limited.
Silver (XAG/USD) regains positive traction following the previous day's modest downfall and climbs back above the $31.00 mark during the Asian session on Tuesday. The white metal, however, remains below the $31.45 area, or its highest level since July 17 touched last week, though the technical setup seems tilted firmly in favor of bullish traders.
The recent breakout through a short-term descending trend line, along with the fact that oscillators on the daily chart have been gaining positive traction, validates the positive outlook for the XAG/USD. Hence, a subsequent strength beyond the monthly peak, around the $31.45 region, en route to the July swing high, around the $31.75 zone, looks like a distinct possibility.
The XAG/USD might then aim to reclaim the $32.00 mark and extend the momentum further towards challenging a one-decade high, around mid-$32.00s touched in May.
On the flip side, the $30.70-$30.65 area now seems to protect the immediate downside ahead of the overnight swing low, around the $30.35 region. Any further decline towards the $30.00 psychological mark might still be seen as a buying opportunity. This, in turn, should limit the downside near the aforementioned trend-line resistance breakpoint, around the $29.40-$29.35 region.
The said trend line now coincides with the 50-day Simple Moving Average (SMA) and is currently pegged near the $29.00 mark, which should act as a key pivotal point. A convincing break below the latter might shift the bias in favor of bearish traders and pave the way for some meaningful corrective decline for the XAG/USD.
Silver daily chart
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
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
