Silver Price Forecast: XAG/USD trades below mid-$36.00s; bullish potential seems intact
- Silver edges higher on Tuesday, though it remains confined in a multi-day-old range.
- The bullish technical setup supports prospects for an eventual break to the upside.
- A corrective slide below the $36.00 mark might still be seen as a buying opportunity.
Silver (XAG/USD) extends its sideways consolidative price move for the third consecutive day and trades below mid-$36.00s during the Asian session on Tuesday. The white metal, meanwhile, remains within striking distance of its highest level since February 2012 touched last week, and seems poised to appreciate further.
From a technical perspective, the range-bound price action witnessed over the past week or so might still be categorized as a bullish consolidation phase against the backdrop of a strong rally from the April monthly swing low. Furthermore, positive oscillators on the daily chart suggest that the path of least resistance for the XAG/USD is to the upside.
Any subsequent move higher, however, might confront some resistance near the multi-year peak, around the $36.85-$36.90 area. A sustained strength beyond will reaffirm the constructive outlook and allow the XAG/USD to extend a well-established uptrend beyond the $37.00 mark, towards testing the February 2012 swing high, around mid-$37.00s.
On the flip side, any corrective slide below the $36.00 mark is likely to attract some dip-buyers near last week's low, around the $35.45 area. A convincing break below the latter, however, could make the XAG/USD vulnerable to weaken below the $35.00 psychological mark and extend the fall towards the $34.55-$34.50 region en route to the $34.00 round figure.
Silver 4-hour 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
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
