Silver Price Forecast: XAG/USD is testing resistance at $38.30
- Silver extends its rally to test resistance at $38.30
- The Dollar remains on its back foot amid higher hopes of upcoming Fed rate cuts.
- Momentum indicators have reached oversold levels, pointing to a potential consolidation.
Silver (XAG/USD) is heading higher on Thursday, favoured by a weaker US Dollar, as market concerns about the US economic outlook and higher hopes of Fed rate cuts are weighing heavily on the US Dollar.
The US Dollar Index, which measures the Greenback against a basket of the most traded currencies, has depreciated more than 2% from Friday’s highs, and is testing the 98.00 round level, ahead of US Jobless claims data and with markets expecting Trump to appoint loyalist doves to cover the Federal Reserve’s vacancies.
Technical analysis: Resistance at $37.30 might hold bulls
The technical picture points to an immediate bullish trend, but the 4-hour RSI has reached overbought levels just as price action reached the $38.30 resistance level (July 28 and 29 highs), which is coincident with the 98.00 round level in the US Dollar Index.
Silver has rallied more than 5% from Friday’s lows, and it might need additional stimulus to extend gains further. The US Jobless claims report might be the catalyst. Further up, the next targets are the July 22 and 24 lows, at $38.75 and the July 24 high, at $39.20.
On the flipside, a reversal below intra-day lows at $36.85 might find support at the August 5 low of $37.30 ahead of Friday’s low of $36.21
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
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.
