Silver Price Forecast: XAG/USD resumes gains with $34.80 on focus
- Silver correction has been capped at $34.00; the trend remains positive.
- US Dollar’s recovery is losing momentum ahead of US employment and services data..
- XAG/USD bulls are focusing on the $3460-$34.80 resistance area.
Silver prices (XAG/USD) correction from year-to-date highs below $35.00 has been limited at the $34.00 area, and the precious metal bounced up again to consolidate at the $34.50 area on Wednesday, with the 34.80 high at a short distance.
Bears have been contained well above a previous resistance area at the $33.50-$33.70, and the 4-Hour RSI remains well above the 50 level, highlighting the pair’s positive bias.
The US Dollar Index seems to have lost momentum, following a moderate recovery on Tuesday. The enthusiasm from the strong job openings data seems to have faded, with investors growing cautious ahead of US ADP and Services PMI data. The Dollar needs more good news to keep US debt and tariffs concerns subdued.
All in all, XAG/USD maintains its bullish trend intact with the 161.8% Fibonacci extension of the May 20-22 rally, at $34.60, holding bulls ahead of Monday’s high, at $34.80. Above here, a late 2012 high lies at $35.40
On the downside, immediate support is at $34,00, followed by the mentioned $33.70 and then at the $32.65-$32.75 zone.
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.
