Silver Price Forecast: XAG/USD edges above $38.00 as bulls await catalyst
- Silver consolidates near $38.00 as bullish momentum stalls despite RSI favoring buyers.
- Break above $38.50 could spark rally toward $39.00 and $40.00.
- Downside risks emerge below $37.31, with key support at $36.86 (20-day SMA).
Silver price advanced on Thursday, 0.55% as the Greenback posted solid gains during the North American session, even though Wall Street finished the session with gains. Upbeat economic data in the US suggests the economy is strong, though it was not an excuse for the grey metal to climb back above $38.00, poised to end the week almost flat.
XAG/USD Price Forecast: Technical outlook
From a price action standpoint, XAG/USD remains upwardly biased, but it has consolidated over the last three days, staying glued to the $38.00 figure. A daily close above this level opens the door for an upside recovery.
Momentum, as measured by the Relative Strength Index (RSI), indicates that buyers are in control; however, the RSI slope remains flat, suggesting a lack of catalysts that could prompt traders to enter long/short positions.
For a bullish continuation, Silver must clear the $38.50 level, allowing buyers to test $39.00. Once cleared up, the next lies $39.50 and the $40.00 mark. Conversely, if XAG/USD tumbles below $38.00, the first support would be the June 18 high, now turned support, at $37.31, followed by $37.00 and the 20-day SMA at $36.86.
XAG/USD Price Chart – Daily
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
Christian Borjon Valencia
FXStreet
Christian Borjon began his career as a retail trader in 2010, mainly focused on technical analysis and strategies around it. He started as a swing trader, as he used to work in another industry unrelated to the financial markets.
