Silver Price Forecast: XAG/USD declines to near $58.40 as US Dollar regains ground
- Silver price tumbles to near $58.40 as the US Dollar attempts to snap a three-day losing streak.
- The Fed left interest rates unchanged on Wednesday, as expected.
- Higher oil prices will keep the upside in the Silver price restricted.
Silver price (XAG/USD) is down almost 1% to near $58.40 during the Asian trading session on Friday. The white metal faces selling pressure as the US Dollar (USD) rebounds slightly, attempting to snap a three-day losing streak.
At press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.23% higher to near 100.20.
Technically, a higher US Dollar makes the Silver price an unfavorable risk-reward bet for investors.
However, the Silver price could rebound as the outlook of the US Dollar has become vulnerable following the Federal Reserve’s (Fed) monetary policy announcement on Wednesday, in which it left interest rates unchanged and committed to “no forward-guidance” policy.
Dollar slides as Fed rhetoric fails to convince markets
Strategists at Brown Brothers Harriman note that the USD “dropped sharply for two reasons.” They explain that, first, “markets unwounded the residual 30% odds of a July hike,” and second, Fed Chair Kevin Warsh “failed to turn tough inflation rhetoric into a credible policy.” BBH warns that Warsh “may now find himself in a more consequential battle with markets that can further raise long-term yields, weaken the dollar, and force the Fed into a more painful response.”
Elevated oil prices due to constrained global energy supply amid the ongoing military aggression between the United States (US) and Iran are likely to keep the Silver price’s upside limited.
Higher oil prices boost global inflation expectations, which forces central banks to tighten monetary conditions. Such a scenario bodes poorly for non-yielding assets, like Silver.
Silver technical analysis
XAG/USD trades lower at around $58.36, keeping a bearish near-term tone as it holds beneath the 20-day Exponential Moving Average (EMA) at $58.91. The positioning below this short-term trend gauge suggests rallies remain corrective for now, while the Relative Strength Index (RSI) around 46 stays in neutral territory, hinting at subdued downside momentum rather than an outright oversold condition.
On the topside, initial resistance is defined by the 20-day EMA at $58.91; a daily close above this level would be needed to ease the current bearish bias and open the door to a deeper recovery. Looking up, the next resistance level would be the July 22 high at $60.94.
On the downside, the July 28 low at $56.64 and the July 17 low at $54.77 are key support levels.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
