Silver Price Forecast: Fed hawks knock XAG/USD toward $64 support
- XAG/USD tumbles as Fed officials reinforce further tightening expectations.
- Bearish RSI points lower as $64.00 support comes under pressure.
- Break below $63.45 exposes $62.30, $61.01 and $60.00 next.
Silver (XAG/USD) price tumbles over 3.67% on Wednesday as investors increase Federal Reserve (Fed)-hawkish bets, following remarks by several officials supporting last week’s rate hike and penciling in further tightening. XAG/USD trades at $64.59, after reaching a high of $67.52.
XAG/USD Price Forecast: Technical Outlook
After forming a ‘head and shoulders’ chart pattern, which was later negated, the Silver price seems poised to consolidate in the $63.45-$67.50 range in the short term.
On the upside, the first key resistance is the 100-day Simple Moving Average (SMA) at $66.20, followed by $67.00. At the bottom of the range, the 50-day SMA at $63.45 is the first support, followed by $60.00.
The Relative Strength Index (RSI) indicates bearish momentum, with the index below its neutral level and in an almost vertical decline. Hence, in the short-term, XAG/USD is tilted to the downside.
Silver’s first support is the $64.00 mark. A breach of the latter will expose the 50-day SMA at $63.45, followed by the September 16 low of $62.30. On further weakness, the next key support levels are the March 23 low of $61.01 and the $60.00 milestone.
On the flip side, if XAG/USD reverses course and aims upward, the first resistance is the September 22 high of the day (HOD) at $67.55. A decisive breakout will expose the $70.00 mark, ahead of the August 28 swing high of $71.12.
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.
