Silver Price Forecast: XAG/USD jumps to 3-week high as the Dollar sinks
- XAG/USD up 1.63% as US 10-year yields tumble due to rate-cut bets pressuring the Dollar.
- Price hits $38.65, clearing last higher-high; next resistance at $39.00, then YTD high of $39.53.
- Downside risks if $38.00 fails, with supports at $37.50 and $36.21.
Silver price rises over 1.63% on Wednesday, boosted by broad US Dollar weakness as traders had fully priced in a rate cut by the Federal Reserve at next month's meeting.
Consequently, US Treasury yields, which correlated inversely with XAG/USD, tumbled with the 10-year benchmark note, down five basis points at 4.236%. At the time of writing, the grey metal trades at $38.53, after bouncing off daily lows of $37.85.
XAG/USD Price Forecast: Technical Outlook
Silver price uptrend remains intact, hitting a three-week high of $38.65 with buyers clearing the last higher-high ahead of challenging the $39.00, with them eyeing the YTD peak of $39.53. From a price action standpoint, if those two levels are cleared, the grey metal could test $40.00 in the near term.
Momentum is bullish as depicted by the Relative Strength Index (RSI). Nevertheless, if something goes wrong, XAG/USD’s drop below $38.00 could put buyers under stress, and bears could challenge the latest cycle low of $37.50, the August 12 low. If cleared, the next area of interest would be the July 31 swing low of $36.21.
XAG/USD Price Chart – Daily
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
Christian Borjon Valencia
FXStreet
Christian Borjon began his career as a retail trader in 2010, mainly focused on technical analysis and strategies around it. He started as a swing trader, as he used to work in another industry unrelated to the financial markets.
