Silver Price Forecast: XAG/USD recovery stalls below $31.45 with NFP data eyed
- Silver rally loses momentum with bulls capped right below the last two weeks' range top, at $31,45.
- The Dollar has steadied with investors awaiting the release of the US employment report.
- XAG/USD: Above $31.40, the next target is the November 7 high, at $32.15.
Silver (XAG/USD) rally from last week’s lows near $30.00 has been capped at the top of the last two week’s horizontal channel, at 31.15, with investors awaiting the release of November’s US employment data.
The US economy is expected to have created 200,000 new jobs in the month, while the unemployment rate ticked up to 4.2%. This latter data and softer wage inflation are likely to keep hopes of December rate cuts alive.
On Thursday, the weekly jobless claims showed a larger-than-expected increase in the last week of November. This, coupled with below-consensus ADP employment figures seen on Wednesday, has cast some doubt about the NFP reading and increased pressure on the USD.
The technical picture shows the bullish momentum losing steam, with the 4-hour RSI turning down towards the 50 level and bulls capped below the mentioned $31.45. Above here, the next target is the November, 7 high, at 32.15. Supports are $30.90 and $30.45 (Dec 5 and 4 lows respectively)
XAG/USD 4-hour 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
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.
