Silver Price Forecast: XAG/USD soars over 2% on stagflation woes igniting safe-haven demand
- Silver jumps as investors seek safety amid rising stagflation risks and falling US real yields.
- Bulls clear $33.00 and $33.50; eyes now on $33.94 and key resistance at $34.86.
- Downside risks if price falls below $33.00, with support at $32.66 and 50-day SMA near $32.04.
Silver price soared on Tuesday, registering gains of over 2.10%, as a weaker US Dollar could not cap the metal’s advance amid increased fears of a stagflationary scenario, following a Conference Board (CB) Consumer Confidence poll. At the time of writing, the XAG/USD trades at $33.72, virtually unchanged.
XAG/USD Price Forecast: Technical outlook
On Monday, I wrote, “Silver price formed a ‘quasi gravestone doji’ that usually appears in an uptrend, signifying a pause or end of the trend. Nevertheless, as it is preceded by a downtrend, it might indicate that bears had lost steam while buyers stepped in near the day's lows of $32.89.” That’s what happened.
Bulls moved as a stampede and drove the precious metal higher, capitalizing on falling US yields, clearing the $33.00 and $33.50 psychological figures on its way to current spot prices. Should Silver continue to find acceptance higher, the XAG/USD could reach the March 20 peak of $33.94, ahead of testing the $34.00 figure. If surpassed, the next stop would be last October’s monthly peak at $34.86.
Conversely, if XAG/USD slips beneath $33.00, immediate support emerges at the March 21 low of $32.66. Once hurdled, the next stop is the 50-day Simple Moving Average (SMA) at $32.04.
XAG/USD Price Chart – Daily
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
Christian Borjon Valencia
FXStreet
Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.
