- Silver consolidates near a multi-month peak touched earlier this Wednesday.
- The technical setup favors bulls and supports prospects for additional gains.
- Any corrective slide could be seen as a buying opportunity and remain limited.
Silver (XAG/USD) enters a bullish consolidation phase after touching a four-month top during the Asian session on Wednesday and currently trades around the $32.10-$32.15 region, nearly unchanged for the day. The technical setup, meanwhile, supports prospects for an extension of the recent uptrend witnessed over the past two weeks or so.
The recent breakout through a short-term descending trend-line resistance and the overnight strong move up beyond the $31.50 supply zone was seen as a fresh trigger for bullish traders. Moreover, oscillators on the daily chart are holding comfortably in positive territory and are still away from being in the overbought zone. This, in turn, suggests that the path of least resistance for the XAG/USD is to the upside.
From current levels, any subsequent move up is likely to confront resistance near mid-$32.00s, or a one-decade top touched in May. Some follow-through buying will reaffirm the near-term positive outlook and pave the way for a further appreciating move towards conquering the $33.00 round-figure mark for the first time since December 2012.
On the flip side, any meaningful slide could be seen as a buying opportunity near the $31.50-$31.40 region. This is followed by support near the $31.25 area and the $31.00 mark, which if broken could drag the white metal to the $30.60-$30.55 zone. The XAG/USD could extend the slide to the $30.00 psychological mark en route to the $29.70-$29.65 area, or the descending trend-line resistance breakpoint, now turned support.
The latter now coincides with the 100-day Simple Moving Average (SMA) and should act as a key pivotal point. A convincing break below the said confluence support will suggest that the XAG/USD has topped out in the near term and prompt aggressive technical selling, paving the way for a deeper corrective decline.
Silver daily chart
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.
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