Silver Price Forecast: XAG/USD stalls near $38.00, traders await Fed’s decision
- Silver consolidates above 20-day SMA at $37.88, signaling indecision near key support.
- RSI remains bullish but flat, reflecting lack of momentum ahead of Fed rate decision.
- Break above $38.50 opens path to $39.00; below $38.00 risks $37.31 and $37.00 support levels.
Silver price post back-to-back doji candles, near the $38.00 figure, as the grey metal market consolidates ahead of the Federal Reserve monetary policy decision.
Mixed signals in the financial markets, with a strong US Dollar gaining 0.24% in the day as depicted by the US Dollar Index (DXY) and falling US Treasury yields, kept traders on the sidelines. The XAG/USD trades at 38.18, virtually unchanged.
XAG/USD Price Forecast: Technical outlook
Silver found a bottom near $38.00, slightly above the 20-day Simple Moving Average (SMA), which is acting as a strong demand area near $37.88. Momentum shows that neither buyers nor sellers are rocking the boat, according to the Relative Strength Index (RSI), staying bullish but flat. However, the latter were the ones that drove XAG/USD from around yearly highs of $39.52 toward the current spot price.
If XAG/USD climbs back above $38.50, $39.00 would be the next area of interest. Overhead lies the YTD high at $39.52. On the other hand, a drop below $38.00 exposes the 20-day SMA at $37.88, followed by the June 18 peak at $37.31, before challenging $37.00.
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
Christian Borjon began his career as a retail trader in 2010, mainly focused on technical analysis and strategies around it. He started as a swing trader, as he used to work in another industry unrelated to the financial markets.
