Silver Price Analysis: XAG/USD seems vulnerable, short-term trading range breakdown in play
- Silver attracts some buyers during the Asian session on Thursday, albeit lacks follow-through.
- The overnight sustained breakdown through a short-term trading range favors bearish traders.
- Any subsequent move-up could attract fresh sellers and remain capped near the $31.00 mark.
Silver (XAG/USD) ticks higher during the Asian session on Thursday and moves away from a two-week low, around the $30.00 psychological mark touched the previous day. The white metal currently trades around the $30.40 region, up nearly 0.35% for the day, though lacks bullish conviction.
From a technical perspective, the recent failure to build on the momentum beyond the $31.40 supply zone and the overnight breakdown through a short-term trading range support could be seen as a fresh trigger for bearish traders. That said, neutral oscillators on the daily chart warrant caution and make it prudent to wait for some follow-through selling below the $30.00 mark before positioning for any further depreciating move.
The XAG/USD might then weaken further below the $29.70 horizontal zone and test the next relevant support near the $29.15 region. This is closely followed by the $29.00 mark, which if broken decisively will expose the June monthly swing low, around the $28.60-$28.55 area. The white metal could eventually drop to the 100-day Simple Moving Average (SMA), currently pegged near the $28.00 round-figure mark.
On the flip side, any subsequent move up is likely to confront stiff resistance ahead of the $31.00 mark. A sustained strength beyond has the potential to lift the XAG/USD back towards the $31.40 supply zone. Some follow-through buying, leading to a subsequent move beyond the monthly peak, around the $31.80 area, should allow bulls to retake the $32.00 mark and challenge the YTD peak, near the mid-$32.00s touched in May.
Silver 4-hour 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.
