Silver Price Forecast: XAG/USD climbs beyond $43.00, highest since September 2011
- Silver challenges a multi-month-old ascending channel resistance at the start of a new week.
- A slightly overbought RSI on the daily chart warrants caution before placing fresh bullish bets.
- Any corrective slide below $43.00 could be seen as a buying opportunity and remain limited.
Silver (XAG/USD) builds on Friday's breakout momentum above the $43.00 mark and touches a fresh high since September 2011 at the start of a new week. The white metal trades around the $43.25 area during the Asian session, up 0.35% for the day, flirting with the top end of an ascending channel extending from the April swing low.
The aforementioned channel points to a well-established uptrend and backs the case for a further near-term appreciating move for the XAG/USD. That said, the Relative Strength Index (RSI) on the daily chart is flashing slightly overbought conditions and makes it prudent to wait for some near-term consolidation or a modest pullback before placing fresh bullish bets.
Any corrective slide below the $43.00 round figure, however, is more likely to attract fresh buyers near the $42.55 region. This, in turn, should help limit the downside for the XAG/USD near the $42.20-$42.15 region. This is closely followed by the $42.00 mark, below which the commodity could slide to the $41.65 area before eventually dropping to test sub-$41.00 levels.
On the flip side, acceptance above the ascending channel resistance will be seen as a fresh trigger for bullish traders and allow the XAG/USD to test the September 2011 swing high, around the $43.40 region. The positive momentum could extend further towards reclaiming the $44.00 round figure en route to the August 2011 peak, around the $44.25 region.
Silver daily chart
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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
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
