Silver Price Forecast: XAG/USD remains close to bullish flag hurdle near $33.20 area

Silver regains positive traction following the previous day’s pullback from over one-week high.
The technical setup favors bullish traders and supports prospects for further near-term gains.
A break below a short-term descending channel support is needed to negate the positive bias.

Haresh Menghani FXStreet

Silver (XAG/USD) attracts fresh buying during the Asian session on Thursday and reverses a major part of the previous day's retracement slide from over a one-week high. The white metal climbs to the $33.00 neighborhood in the last hour and seems poised to appreciate further.

From a technical perspective, a descending channel on short-term charts constitutes the formation of a bullish flag against the backdrop of the recent goodish recovery from the $28.45 area, or the year-to-date low touched in April. Moreover, oscillators on daily/hourly charts are holding in positive territory, validating the near-term constructive outlook for the XAG/USD.

However, it will still be prudent to wait for a breakout above the trend-channel hurdle near the $33.20 area before positioning for additional gains. The XAG/USD might then aim to surpass the $33.70 intermediate barrier and reclaim the $34.00 round-figure mark. Some follow-through buying will be seen as a fresh trigger for bulls and pave the way for a further appreciation.

On the flip side, the $32.50-$32.45 area, followed by the overnight swing low, around the $32.25 region, could offer some support to the XAG/USD ahead of the $32.00 mark. The next relevant support is pegged around the $31.60-$31.55 zone, representing the lower end of the aforementioned trend-channel, which, if broken, might shift the near-term bias in favor of bearish traders.

Silver daily chart

Silver FAQs

Why do people invest in Silver?

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.

Which factors influence Silver prices?

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.

How does industrial demand affect Silver 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.

How do Silver prices react to Gold’s moves?

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.

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