Silver Price Forecast: XAG/USD seems vulnerable below $49.35-$49.40 pivotal resistance

Silver struggles to capitalize on a modest Asian session uptick to the $48.55-$48.60 region.
The technical setup favors bearish traders and backs the case for a further depreciation.
A sustained strength beyond $49.35-$49.40 is needed to negate the negative outlook.

Haresh Menghani FXStreet

Silver (XAG/USD) attracts some sellers following an Asian session uptick to the $48.55-$48.60 region and erodes a part of the previous day's gains. The white metal currently trades around the $47.75 region, down 0.70% for the day.

From a technical perspective, the XAG/USD has been struggling to build on its strength beyond the 38.2% Fibonacci retracement level of the corrective slide from the all-time peak touched in October, around the $49.35-$49.40 supply zone. This, in turn, favors bearish traders and back the case for a further near-term depreciating move.

However, neutral oscillators on the daily chart make it prudent to wait for acceptance below the $47.00 mark before placing fresh bearish bets. The XAG/USD might then accelerate the fall towards the $46.45 intermediate support en route to the $46.00 round figure before aiming to retest the October swing low, around the $45.75 region.

On the flip side, the Asian session high, around the $48.55-$48.60 zone, might now act as an immediate hurdle, above which the XAG/USD could reclaim the $49.00 mark. Any further move up, however, might remain capped near the $49.35-$49.40 region. A sustained strength beyond the latter might shift the bias in favor of bullish traders.

The subsequent move up has the potential to lift the XAG/USD towards the $50.00 psychological mark, which coincides with the 50% Fibo. retracement level. The momentum could extend further towards the $50.55-$50.60 intermediate hurdle en route to the $51.00 mark and the $51.20 region, or the 61.8% Fibo. retracement level.

Silver 4-hour 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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