Silver Price Forecast: Head-and-shoulders break puts $60 back in play
- XAG/USD breaks neckline, but daily close must confirm pattern.
- Hot PPI boosts yields, Dollar and Fed hike expectations.
- Break below $60.00 exposes the head-and-shoulders target near $55.00.
Silver (XAG/USD) price erases Wednesday's gains and forms a bearish head-and-shoulders chart pattern on Thursday after the white metal tanks and breaks a support trendline around $64.00-$64.15, exacerbating the decline below $63.50. At the time of writing, XAG/USD trades at $63.72, down over 5.30%.
XAG/USD Price Forecast: Technical Outlook
Silver shifted gears on Thursday, following a hot US Producer Price Index (PPI) report, which is driving US bond yields higher, underpinning the US Dollar and increasing the chances of a rate hike by the Fed next week. Nevertheless, a softer CPI reading on Friday would leave the meeting 'live,' while higher prices would cement a hawkish case.
Technically speaking, XAG/USD tumbled over $3.60 and cleared the head-and-shoulders neckline. However, a daily close below the latter is required to confirm the bearish chart pattern. In that scenario, the next support levels would be $60.00, followed by the head-and-shoulders target near $55.00.
On the upside, the initial significant resistance for XAG/USD is at $70.00. A strong push could send spot prices up to the 200-day SMA at $73.00, paving the way for buyers to target $75.00.
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.
