Silver Price Forecast: XAG/USD consolidates above $73.00 as bears pause ahead of Fed

Silver struggles to lure buyers and remains close to a three-week low, touched on Tuesday.
The technical setup favors bearish traders and backs the case for a further depreciation.
Any attempted recovery is more likely to remain capped near the 200- EMA hurdle on H4.

Haresh Menghani FXStreet

Silver (XAG/USD) edges higher during the Asian session on Wednesday, though it lacks follow-through as traders opt to move to the sidelines ahead of the crucial FOMC policy update. The white metal currently trades above the $73.00 mark and remains within striking distance of a three-week trough set on Tuesday. Moreover, the technical setup favors bearish traders and backs the case for an extension of a nearly two-week-old downtrend.

Against the backdrop of the recent failure to conquer the 200-hour Exponential Moving Average (EMA), the overnight weakness below the 38.2% Fibonacci retracement level of the March-April move up favors the XAG/USD bears. Moreover, the Relative Strength Index (RSI) at roughly 39 stays in weak territory, and the Moving Average Convergence Divergence (MACD) histogram hovers slightly negative. Momentum indicators together suggest that the downside pressure persists even as the recent sell-off shows tentative signs of stabilization.

However, some follow-through selling below the overnight swing low, around the $72.00 mark, marking the 50% retracement level, is needed to reaffirm the negative bias. The subsequent decline could drag the XAG/USD to deeper Fibo. levels at $69.39 and $65.73, where buyers would likely attempt to slow any extended decline. On the topside, the 38.2% Fibo. retracement near $74.54 could act as the first significant hurdle ahead of the 200-EMA around $76.89, with the 23.6% retracement at $77.72 reinforcing a broader supply zone higher up.

(The technical analysis of this story was written with the help of an AI tool.)

XAG/USD 4-hour 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.

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