Silver Price Forecast: Bulls threaten bearish setup after Fed hike
- XAG/USD surges as RSI climbs back above neutral territory.
- A break above $66.56 exposes $67.00 and $70.00 resistance.
- Failure below the neckline revives downside toward $62.86 and $60.00.
Silver (XAG/USD) surges to five-day highs above $66.00 on Thursday as traders digest the Federal Reserve (Fed) rate hike on Wednesday. Meanwhile, a drop in US Treasury yields is undermining the Greenback, which clings to early gains but has barely changed. At the time of writing, XAG/USD trades at $65.41, up over 3.90%.
XAG/USD Price Forecast: Technical outlook
Even though the ‘head-and-shoulders’ chart pattern remains in play, a potential breakout of the neckline can negate the bearish formation. The Relative Strength Index (RSI) shows bullish momentum is building, with the RSI clearing its 50-neutral level and trending higher.
With that said, the first resistance for XAG/USD is the 100-day Simple Moving Average (SMA) at $66.56. A breach of the latter will expose the $67.00 mark as the white metal embarks on a journey to reclaim $70.00. Above these levels sits the 200-day SMA at $73.16.
On the other hand, if Silver dives below the ‘head and shoulders’ neckline, it can clear the way for a potential resumption of the downtrend. The first line of defense is the 50-day SMA at $62.86, ahead of the March 23 swing low at $61.01, ahead of the $60.00 mark. Below the next support is the ‘head-and-shoulders’ measured objective near $55.00.
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.
