Silver Price Forecast: XAG/USD retakes $30.00 mark; setup warrants caution for bulls
- Silver gains positive traction for the second straight day, though the upside seems limited.
- The recent decline along a descending channel points to a well-established downtrend.
- Neutral oscillators on the daily chart further warrant some caution for bullish traders.
Silver (XAG/USD) attracts some buyers for the second straight day and climbs back above the $30.00 psychological mark during the first half of the European session on Wednesday. The technical setup, however, warrants some caution for bullish traders and before positioning for any further appreciating move.
The recent pullback from the vicinity of the $35.00 mark, or a multi-year peak touched in October, has been along a descending channel, which points to a well-established downtrend. Moreover, oscillators on the daily chart – though have recovered from bearish territory – are yet to gain positive traction. Hence, any subsequent move up might continue to confront some hurdle near the top boundary of the said channel, around the $30.45 region.
This is followed by the 100-day Simple Moving Average (SMA), currently pegged ahead of the $31.00 round figure. A sustained strength beyond the latter will suggest that a nearly three-month-old corrective decline has run its course and pave the way for further gains. The XAG/USD might then accelerate the positive move towards the $31.70 intermediate hurdle en route to the $32.00 mark and the December swing high, around the $32.30-$32.35 region.
On the flip side, the weekly trough, around mid-$29.00s touched on Monday, could offer immediate support. A convincing break below will reaffirm the negative setup and make the XAG/USD vulnerable to weaken further below the $29.00 mark, towards retesting the $28.75-$28.70 support, or a multi-month low touched in December. Some follow-through selling will be seen as a fresh trigger for bearish traders and pave the way for a further depreciating move.
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
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
