Silver Price Forecast: XAG/USD struggles at $32.00, retreats as US yields edge higher
- Silver drops 0.85%, retreating from a daily peak of $32.26, pressured by rising US Treasury yields.
- XAG/USD must decisively clear $32.00 for a bullish continuation toward the YTD high of $32.51.
- Failure to hold above $32.00 risks a slide towards $31.44, with $31.00 as key support.
Silver price retraces after matching the September 24 daily peak of $32.26 and drops beneath the $32.00 figure, losing over 0.85%, weighed by higher US Treasury yields. Also, a recovery of the US Dollar and investors' reluctance to push the grey metal prices higher kept XAG/USD at familiar levels.
XAG/USD Price Forecast: Technical outlook
The uptrend on Silver remains in place, but price action suggests that buyers are struggling to keep the spot price above the $32.00 mark. During the year, XAG/USD has cracked the $32.00 barrier eight times, but after that, the non-yielding metal, dove.
For a bullish continuation, the XAG/USD must decisively clear the $32.00 mark. After that, traders need to test the year-to-date (YTD) high at $32.51, followed by the $33.00 mark. On further strength, XAG/USD could aim towards the October 1, 2012, peak at $35.40.
Conversely, if XAG/USD falls below $32.00, the next support would be the September 20 daily high at $31.44 before testing $31.00.
XAG/USD Price Action – Daily Chart
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.
