Silver Price Forecast: XAG/USD bears have the upper hand while below 200-day SMA near $30.00

Silver kicks off the new week on a weaker note and seems vulnerable to weakening further.
The recent failures near the 200-day SMA validate the negative outlook for the XAG/USD.
A sustained strength beyond the $30.00 mark is needed to negate the near-term bearish bias.

Haresh Menghani FXStreet

Silver (XAG/USD) extends Friday's modest pullback from the vicinity of the $30.00 psychological mark and edges lower at the start of a new week. The white metal drops below the mid-$29.00s during the Asian session and now seems to have stalled its recovery from a multi-month trough touched in December.

From a technical perspective, the recent breakdown and repeated failures near the 200-day Simple Moving Average (SMA) favor bearish traders. This, along with the fact that oscillators on the daily chart are holding in negative territory, suggests that the path of least resistance for the XAG/USD is to the downside. Some follow-through selling below the $29.40 area will reaffirm the outlook and make the commodity vulnerable to weakening towards the $29.00 mark.

The downside trajectory could extend further towards the $28.75-$28.70 region, or the multi-month low, which should act as a key pivotal point. A sustained break below will set the stage for an extension of a well-established downtrend from the $35.00 neighborhood, or a multi-year peak touched in October.

On the flip side, the $30.00 mark (200-day SMA) might continue to act as an immediate strong barrier, above a bout of a short-covering could lift the XAG/USD to the next relevant hurdle near the $30.50 area. The momentum could eventually allow the white metal to reclaim the $31.00 mark and test the $31.15-$31.20 supply zone.

Silver daily chart

Silver FAQs

Why do people invest in Silver?

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.

Which factors influence Silver prices?

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.

How does industrial demand affect Silver 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.

How do Silver prices react to Gold’s moves?

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

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

AUD/USD turns south toward 0.6900 as USD firms up

AUD/USD sees fresh selling and drops toward 0.6900 in late Asian trading on Monday, as renewed US Dollar strength weighs on the pair amid lingering Middle East and Russia-Ukraine geopolitical tensions. Focus remains on Oil prices, Treasury bond yields, and RBA expectations for fresh trading impetus in the major.

USD/JPY retakes 158.00 amid hawkish BoJ bets, firmer USD

USD/JPY erases losses and retakes 158.00 in the Asian session on Monday, trading within a one-week-old range. Geopolitical uncertainty continues to underpin the US Dollar, despite fading Fed rate hike hopes, supporting the pair's rebound. However, further upside could be capped by hawkish BoJ expectations and looming intervention risks that could support the Japanese Yen.

Gold flirts with $4,100, four-day lows

Gold adds to Friday’s losses and comes closer to the key $4,100 mark per troy ounce at the beginning of the week. The yellow metal’s retracement comes in response to the persistent advance in the US Dollar in combination with the resurgence of the upside momentum in US Treasury yields across the curve.

Crypto Today: Bitcoin rally slows while Ethereum and XRP extend recovery amid slowing ETF inflows

Bitcoin is narrowly consolidating while trading above $86,000 at the time of writing on Monday. Altcoins, on the other hand, show a positive outlook, with Ethereum edging higher above $2,700 while Ripple steadies above $1.52.

Eurozone inflation just hit 3.8%, its highest in three years. This chart shows why the ECB can’t simply hike its way out

The ECB would normally have a relatively straightforward answer to inflation running almost twice its target: raise interest rates. But these are not normal circumstances. This time, the bond market is already doing part of the tightening for it, leaving the ECB facing an increasingly difficult dilemma.