Silver Price Forecast: XAG/USD flat lines around mid-$27.00s, bears have the upper hand
- Silver struggles to capitalize on a modest intraday uptick to the 23.6% Fibo. level.
- The technical setup favours bears and supports prospects for additional losses.
- Any meaningful rise could face difficulty in moving back above the 100-day SMA.
Silver (XAG/USD) struggles to capitalize on the previous day's goodish rebound from the $26.45 area, or the lowest level since early May and seesaws between tepid gains/minor losses through the early European session on Friday. The white metal now seems to have stabilized around the $27.50-$27.55 region and remains below the 23.6% Fibonacci retracement level of the July-August downfall.
The said barrier is pegged near the $27.75 region, which if cleared might trigger a short-covering rally and lift the XAG/USD to the $28.00 mark. The recovery momentum could extend further towards the 38.2% Fibo. level around the $28.50-$28.55 region, though is more likely to remain capped near the 100-day Simple Moving Average (SMA) breakpoint, near the $28.75-$28.80 area. However, some follow-through buying, leading to a subsequent strength beyond the $29.00 mark, might negate any near-term negative bias and pave the way for additional gains.
The XAG/USD might then climb to the $29.45 intermediate hurdle en route to the 61.8% Fibo. level, around the $29.75 region and eventually aim to reclaim the $30.00 psychological mark. That said, technical indicators on the daily chart – though have recovered from lower levels – are still holding deep in negative territory. This, in turn, warrants some caution for bullish traders and positioning for a further intraday appreciating move.
Meanwhile, any meaningful slide now seems to find some support near the $27.30-$27.25 area ahead of the $27.00 mark. A convincing break below has the potential to drag the XAG/USD back towards the $26.50-$26.45 area, or a multi-month low set on Wednesday. The latter should act as a key pivotal point, which if broken will be seen as a fresh trigger for bearish traders and make the white metal vulnerable to test the May monthly swing low, around the $26.00 mark. The commodity could drop further to the $25.60 horizontal support and the $25.00 psychological mark.
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
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
