Silver Price Forecast: 100-day SMA caps bulls as range tightens
- XAG/USD retreats after failing to clear 100-day SMA.
- Flat RSI signals consolidation between key moving averages.
- Break above $66.39 exposes $70.00 and $73.19 next.
Silver price advance stalled at the 100-day Simple Moving Average (SMA) of $66.39 and is set to end Monday’s session with losses of 0.39% as the Greenback rises following last week’s Fed decision. The XAG/USD trades at $66.03 after reaching a high of $67.05.
XAG/USD Price Forecast: Technical outlook
The white metal seems poised to consolidate further within the range delimited by the 100-day Simple Moving Average (SMA) at $66.39 and the 50-day SMA at $63.15.
The market structure of successive series of lower lows and lower highs has been compromised after XAG/USD failed to test the August 3 daily low of $56.57, which could’ve extended Silver losses towards the July 17 swing low of $54.77. Therefore, as the non-yielding metal is close to the top of the range, a breach of the 100-day SMA could pave the way for further upside.
The Relative Strength Index (RSI) is bullish, but the index’s slope turned flat. This indicates that Silver is directionless.
On the upside, if XAG/USD clears the 100-day SMA, it opens the door to challenge $70.00, followed by the 200-day SMA at $73.19.
On further weakness, the first support is the 50-day SMA ahead of the $60.00 psychological figure. Below this key support level, the next stop is the July 17 cycle low of $54.77.
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.
