Silver Price Forecast: XAG/USD rises to near $74.50 within overbought zone

Silver price may rise toward the upper ascending channel boundary around $79.30.
The 14-day Relative Strength Index stands at 70.51, indicating overbought conditions and stretched momentum.
The primary support lies at the nine-day EMA of $71.02.

Akhtar Faruqui FXStreet

Silver price (XAG/USD) gains more than 2% after registering a steep drop of more than 7% in the previous session, trading around $74.40 per troy ounce during the early European hours on Tuesday. Traders engaged in aggressive profit-taking after the XAG/USD pair hit a record high of $85.87 in the previous session.

The technical analysis of the daily chart timeframe suggests the price of the precious metal moves upwards within an ascending channel pattern, strengthening the bullish bias. The 14-day Relative Strength Index (RSI) stands at 70.51 (overbought), signaling stretched momentum.

The nine-day Exponential Moving Average (EMA) rises above the 50-day EMA, and the price holds well above both, framing a strong bullish trend. The short-term average has steepened in recent sessions, reinforcing upside bias.

Immediate resistance aligns at the upper boundary of the ascending channel around $79.30. A break above the channel would help the Silver price to approach the record high of $85.87, which was recorded on December 29.

A sustained push through the channel could extend gains toward new cycle highs, while failure to clear it would encourage consolidation. With moving averages trending higher and positive momentum intact, dips would attract buyers, and the trend would remain supported above the short-term average.

On the downside, support is seen at the nine-day EMA of $71.02, followed by the lower ascending channel boundary around $69.00. Further declines below this confluence support zone would open the doors for the Silver price to explore the region around the 50-day EMA at $58.73.

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.

(The technical analysis of this story was written with the help of an AI tool.)

Author

Akhtar Faruqui

FXStreet

Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.

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