Silver Price Forecast: XAG/USD finds temporary support below $29 with focus on US data
- Silver price finds cushion near $28.70 as US yields slump.
- The Fed is expected to start cutting interest rates from September.
- Investors await the US Q2 GDP and June’s core PCE inflation data.
Silver price (XAG/USD) discovers interim support near $28.70 in Tuesday’s American session after four-day losing spree. The white metal finds temporary support as US bond yields decline amid firm speculation that the Federal Reserve (Fed) will start reducing interest rates from the September meeting.
10-year US Treasury yields fall to near 4.24%. Lower yields on interest-bearing assets reduces the opportunity cost of holding an investment in non-yielding assets, such as Silver.
Meanwhile, the US Dollar (USD) rises as its safe-haven appeal improves due to uncertainty over United States (US) presidential elections in November. Democrats have nominated Vice President Kamala Harris as their contender against Donald Trump-led Republicans.
The victory of Donald Trump is expected to result in higher inflation as he has pledged to cut corporate taxes and interest rates, which could widen the fiscal budget deficit. Also, he is known for favoring restrictive trade policies.
On Tuesday, Silver price in India nosedives as Prime Minister Narendra Modi-led-NDA proposed to cut custom duty on imports of precious metals. The centre reduces basic custom duty to 6% from 10%.
Going forward, investors will focus on the US Q2 Gross Domestic Product (GDP) and the core Personal Consumption Expenditure Price Index (PCE) data for June, which will be published on Thursday and Friday, respectively.
Silver technical analysis
Silver price trades back and forth in a range between $28.50 and $32.50 for almost two months. The white metal drops below the 20-day Exponential Moving Average (EMA), which trades around $30.00, suggesting uncertainty in near term.
The 14-day Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, indicating indecisiveness among market participants.
Silver daily 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
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.
