Silver Price Forecast: XAG/USD drops to multi-week low, bears have the upper hand near $32.00
- Silver remains under heavy selling pressure for the third straight day on Thursday.
- A breakdown below the 100-hour SMA could be seen as a fresh trigger for bears.
- Traders now await acceptance below $32.00 before positioning for further losses.
Silver (XAG/USD) drifts lower for the third straight day – also marking the fourth day of a negative move in the previous five – and drops to over a two-week low during the Asian session on Thursday. The white metal, however, shows some resilience below the $32.00 mark, though the technical setup supports prospects for an extension of a one-week-old downtrend.
An intraday breakdown below the 100-hour Simple Moving Average (SMA) could be seen as a key trigger for bears. Moreover, oscillators on daily/4-hour charts have been gaining negative traction and validate the near-term bearish outlook, suggesting that the path of least resistance for the XAG/USD is to the downside. That said, it will still be prudent to wait for acceptance below the $32.00 mark before positioning for deeper losses.
The subsequent downfall has the potential to drag the XAG/USD to the $31.70 support en route to the $31.55-$31.50 region and eventually to sub-$31.00 levels, or the 200-day SMA. The latter should act as a strong near-term base, which if broken decisively should pave the way for a slide towards the $30.00 psychological mark, with some intermediate support near the $30.55-$30.50 region.
On the flip side, the 100-hour SMA support breakpoint, currently pegged near the $32.35 area, now seems to act as an immediate hurdle ahead of the $32.55 region, the $32.75-$32.80 supply zone. This is closely followed by the $33.00 mark, above which a bout of a short-covering move could lift the XAG/USD to the $33.70 strong barrier. A sustained strength beyond the latter could negate the negative outlook and shift the bias in favor of bulls.
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.
