Silver Price Forecast: XAG/USD extends recovery above $67.00 as yields fall

XAG/USD rallies above $67.00 after bouncing from the $62.00 area earlier this week.
The precious metals are rallying sharply as US long-term yields retreat from highs.
Silver bulls are likely to be tested at the $68.00 area.

Guillermo Alcala FXStreet

Silver (XAG/USD) trades higher for the second consecutive day on Friday, reaching session highs above $67.00 after bouncing from lows near $62.00 earlier this week. Precious metals have drawn support from a moderate reversal in US Treasury yields in the second half of the week, which has offset the negative impact of the Federal Reserve’s hawkish hike.

The Fed raised its benchmark interest rate by a quarter-point to the 3.75-4% band on Wednesday, and Chairman Kevin Warsh reaffirmed the bank’s commitment to fight inflation, hinting at further monetary tightening ahead.

The decision boosted the US Dollar but also triggered a relief in bond markets as confidence in the central bank’s independence was restored. The US benchmark 10-year yield retreated below the critical 5% level, which provided a fresh impulse to the yieldless precious metals.

Technical Analysis: Silver bulls are likely to be tested above $68.00

XAG/USD has bounced from a key support area around $62.00 this week and is heading to resistance just above the $68.00 level, which capped rallies several times earlier in September. Momentum has improved, but indicators in the daily chart remain mixed, with the Relative Strength Index (14) hovering near 56 and the Moving Average Convergence Divergence (MACD) marginally below zero, suggesting that bullish attempts lack follow-through for now.

Bulls need to breach the mentioned resistance above $68.00 (September 4, 9 highs), which closes the path towards the mid-June and late-August highs above $71.00 and the 200-day Simple Moving Average (SMA) at $73.18.

On the downside, session lows near $65.20 are likely to test bears ahead of the mentioned key support area between $62.20 and $63.05, the bottom of the last two months' trading range and the headline of a bearish Head& Shoulders pattern.

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

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

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.

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