Silver Price Forecast: XAG/USD recovers to near $49.00 on US-China trade concerns
- Silver price bounces back to near $49.00 on renewed concerns over the US-China trade outlook.
- US President Trump expresses that the meeting with Chinese leader Xi might not happen.
- Investors await the delayed US CPI data for fresh cues on the monetary policy outlook.
Silver price (XAG/USD) rebounds to near $49.00 during the late Asian trading session on Wednesday after attracting bids around the fresh two-week low at $47.53 posted earlier in the day. The white metal has declined almost 12% since Friday, when investors became confident that the United States (US) and China would reach a trade deal soon.
US President Donald Trump has been expressing confidence that Washington and Beijing will reach a fair deal after his meeting with Chinese leader Xi Jinping later this month in South Korea. However, Trump warned on Tuesday that a meeting with Xi might not take place.
“So now we're going to have a fair deal, and I think we're going to have a very successful meeting,” Trump said on Tuesday, but later added, “Maybe it won't happen. Things can happen where, for instance, maybe somebody will say, 'I don't want to meet. It's too nasty.'" But it's really not nasty," Yahoo News reported.
Signs of uncertainty over global trade often increase demand for safe-haven assets, such as Silver,
Meanwhile, the broader outlook for the Silver price remains upbeat as the Federal Reserve (Fed) is almost certain to cut interest rates in its policy meeting next week. Lower interest rates by the Fed bode well for non-yielding assets, such as Silver.
Ahead of the Fed’s meeting, investors will focus on the delayed US Consumer Price Index (CPI) data for September, which will be released on Friday.
Silver technical analysis
Silver price has corrected significantly from its all-time high around $54.50 posted on Friday. The near-term trend of the white metal has become uncertain as it struggles to return above the 20-day Exponential Moving Average (EMA) slopes higher, which trades around $49.04.
The 14-day Relative Strength Index (RSI) falls below 60.00, suggesting that the bullish momentum has been ended for now.
Looking down, the Silver price could slide further towards the October 2 low of $45.90 and the September 25 low of $43.78 if it breaks below the intraday low of $47.53.
On the upside, the precious metal could return to the all-time high of $54.50 if it breaks above the October 21 high of $52.71.
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
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
