Silver Price Forecast: XAG/USD pulls back from yearly highs but stays above $34.50
- Silver holds above $34.54 after a brief dip below $34.00; buyers reemerge on intraday weakness.
- RSI remains bullish; a break above $35.00 opens the path toward $37.49, the 2012 high.
- A daily close below $34.58 risks a pullback to $34.00 and support at $33.69.
Silver (XAG/USD) price trimmed some of its Monday’s 5% gains, edging down 0.52% on Tuesday, with the grey metal trading near the $34.50 area, stuck to the highs of the current week. Upbeat economic data in the United States (US) pushed XAG/USD under $34.00, but buyers emerged and lifted the non-yielding metal.
XAG/USD Price Forecast: Technical outlook
Silver price maintains its bullish bias despite retreating somewhat during the session and remains above the October 29 swing high of $34.54, which is seen as the first support level. The Relative Strength Index (RSI) indicates that buyers are in control; however, they need to overcome the next key resistance level, which is seen at $35.00. Once cleared, Silver would be poised to test the February 29, 2012, high of $37.49.
Conversely, a daily close of XAG/USD below the March 28 peak of $34.59 would likely result in a decline towards $34.00. In the event of further weakness, the next support level would be the May 22 peak, which has since turned into support at $33.69.
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
Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.
