Silver Price Forecast: XAG/USD consolidates right below $37.00 in risk-off markets
Silver consolidates the previous two days' gains and remains pinned near $37.00.
Trade uncertainty is weighing on investors' sentiment and supporting precious metals on Friday.
XAG/USD remains trading within a horizontal range, with key resistance at $37.30.
Silver (XAG/USD) is trading near its highest levels in the last two weeks, consolidating gains below the $37.00 area after having rallied beyond 2% over the previous two days.
Investors’ concerns about trade uncertainty are keeping precious metals buoyed on Friday as US trade partners await letters from US President Trump informing them about the levies that will be added to their products from July 9.
Technical Analysis: XAG/USD key resistance is at $37.30
The technical picture shows an improved bullish momentum on Friday, yet with the pair trapped within the last two weeks’ trading range, between $35.40 and $37.35, consolidating gains following a sharp rally from early May lows.
Silver bulls remain capped below Thursday’s highs at $37.05 so far, which closes the path towards the June 18 high, at $37.30. Above here, the 127.2% Fibonacci extension of the mentioned horizontal channel, at $37.85, is a plausible target.
On the downside, Thursday´s low, at $36.35, is limiting downside attempts for now. Below here, the July 2 low, at $35.85, is likely to provide some support ahead of the channel bottom at the $35.30-$35.40 area (June 24 and 29 lows).
XAG/USD 4-Hour 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.
Author
Guillermo Alcala
FXStreet
Graduated in Communication Sciences at the Universidad del Pais Vasco and Universiteit van Amsterdam, Guillermo has been working as financial news editor and copywriter in diverse Forex-related firms, like FXStreet and Kantox.
