Silver Price Forecast: XAG/USD hesitates below $37.00 with downside attempts finding buyers
- Silver shows an immediate bullish trend with bulls capped at $37.00 for now.
- Monday's reversal from levels right below multi-year highs encountered strong support above $36.00
- A firm US Dollar and higher US Treasury yields are keeping Silver bulls in check.
Silver (XAG/USD) keeps trading within the last four weeks $2 range, but recent price action shows an ascending trend from late June lows, although the resistance area at $37,00 remains holding bulls and closing the path towards the $37.25 long-term high.
Market’ concerns about trade uncertainty keep buoying the precious metal but the firm US Dollar and the higher US Treasury yields are keeping Silver’s upside attempts limited so far.
Technical Analysis: XAG/USD key resistance is at $37.25
The technical picture shows an improving bullish momentum. Price action highlights a succession of higher highs and higher lows, and the 4-Hour Relative Strength Index has resurfaced above the 50 level.
Monday’s reversal found strong support at the channel bottom, which suggests that dips are finding buyers, but the pair is treading water on Tuesday, in hesitant markets as reflected in the flat daily performance.
Resistance area near the $37.00 area (intra-day high and July 4 high) is capping bulls for now, but downside attempts remain limited with the key $37.25 level (June 18 high) at a relatively short distance.
On the downside, the intraday low at $36.65 is providing support ahead of the channel bottom, now at $36.25. A confirmation below here cancels the bullish view and brings the June 27 and July 1 lows, at 35.80, into focus.
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.
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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.
