Silver Price Forecast: XAG/USD looks to build on momentum beyond $30.00/200-day SMA
- Silver catches fresh bids and remains close to a multi-week top touched on Monday.
- A move beyond the 200-day SMA seems to have shifted the bias in favor of bulls.
- A convincing break below the $28.80-$28.75 area will negate the positive outlook.
Silver (XAG/USD) attracts some dip-buying following the overnight modest pullback from a near three-week high and retakes the $30.00 psychological mark during the Asian session on Tuesday. Moreover, the technical setup now seems tilted in favor of bullish traders and supports prospects for a further appreciating move.
Against the backdrop of the recent recovery from the $28.80-$28.75 area, or a multi-month low touched in December, acceptance above the 200-day Simple Moving Average (SMA) validates the positive outlook for the XAG/USD. Moreover, oscillators on the daily chart have just started gaining positive traction and suggest that the path of least resistance for the commodity is to the upside.
Some follow-through buying beyond Monday's swing high, around the $30.35 region, will reaffirm the bullish bias and lift the XAG/USD beyond the $30.50 hurdle, towards the $31.00 mark. The next relevant barrier is pegged near the $31.15-$31.20 supply zone, which if cleared will suggest that the downtrend from the $35.00 neighborhood, or a multi-year top touched in October has run its course.
On the flip side, dips towards the $29.50-$29.40 area might now be seen as a buying opportunity. This, in turn, should help limit the downside near the $29.10-$29.00 zone. The latter is followed by the multi-month low, around the $28.80-$28.75 region, which if broken will be seen as a fresh trigger for bearish traders and pave the way for deeper losses.
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.
