Silver Price Forecast: XAG pullback puts $63.50 in focus
- XAG/USD falls 2.70% as Hormuz closure risks pressure sentiment.
- RSI dip suggests consolidation despite buyers retaining near-term control.
- Break below $63.28 exposes 50-day SMA and $60.00.
Silver price reverses its course, drops some 2.70% on Tuesday, even though US Treasury yields and the Greenback remained steady, amid news that if the US does not comply with Iran’s demands, the Strait of Hormuz would remain closed. The XAG/USD trades at $64.77, after hitting a daily high of $66.49.
XAG/USD Price Forecast: Technical outlook
From a technical perspective, the white metal is neutral to upward-biased after it reclaimed the 50-day Simple Moving Average (SMA). Nevertheless, the market structure of lower highs and lower lows is intact, at risk of being broken, once Silver clears the June 16 swing high of $71.19
Momentum revealed that buyers continue in control as depicted in the Relative Strength Index (RSI). But a dip in the index suggests that consolidation lies ahead.
For a bullish continuation, the XAG/USD must surpass the 100-day SMA at $68.93. Above lies the $70.00 psychological figure, followed by the June 16 high at $71.19, ahead of the 200-day SMA at $71.39.
On the flip side, if XAG/USD retreats below the August 10 daily low of $63.28 it opens the door for a deeper pullback. The next area of interest would be the 50-day SMA at $61.76 ahead of the $60.00 milestone.
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.
