Silver Price Forecast: XAG/USD stabilizes above $52 after healthy correction
- Silver price bounces back to near $52.30 after a sharp corrective move on Friday.
- Easing US-China trade tensions diminishes demand for safe-haven assets.
- Traders see a slight chance that the Fed could reduce interest rates by more than 50 bps in the remaining year.
Silver price (XAG/USD) trades 0.7% higher to near $52.30 during the late Asian trading session on Monday. The white metal rebounds after a steep corrective move seen on Friday from the all-time high of $54.50.
The precious metal faced intense selling pressure after comments from United States (US) President Donald Trump signaling that the additional 100% tariffs announced on imports from Beijing won’t last long. “High tariffs were not sustainable, though they could stand,” Trump said, Fox Business reported.
Signs of easing global trade tensions diminish the appeal of safe-haven assets, such as Silver.
Trade frictions between the US and China stemmed after Beijing announced export controls on rare earth minerals.
For major updates on US-China trade relations, investors will focus on the meeting between US President Trump and Chinese leader Xi Jinping, which is scheduled later this month at the Asia-Pacific Economic Cooperation meeting in South Korea. Before that, US Treasury Secretary Scott Bessent is scheduled to meet his Chinese counterpart, Vice Premier He Lifeng, later this week.
Meanwhile, firm expectations that the Federal Reserve (Fed) will reduce interest rates atleast by 50 basis points (bps) in the remaining year will keep the Silver price on the front foot. Lower interest rates by the Fed bode well for non-yielding assets, such as Silver.
According to the CME FedWatch tool, traders have almost priced in atleast 50-basis-points (bps) reduction in interest rates in the remaining year and see a 4.8% chance that the Fed could cut borrowing rates by 75 bps.
Silver technical analysis
Silver price retraces from the all-time high of around $54.50 posted on Friday. However, the near-term trend remains bullish as the 20-day Exponential Moving Average (EMA) slopes higher, which trades around $49.00.
The 14-day Relative Strength Index (RSI) oscillates above 60.00, suggesting that a strong bullish momentum remains intact.
Looking down the 20-day EMA would remain a key support. On the upside, the all-time high of $54.50 might act as key barrier.
Silver daily chart
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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
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
