Silver Price Forecast: XAG/USD trades near $36.00 support, ascending channel’s lower boundary

Silver price may find immediate resistance at $36.89, the highest since February 2012.
The 14-day Relative Strength Index remains below the 70 level, indicating a persistent bullish bias.
The ascending channel’s lower boundary around $36.10 acts as the immediate support.

Akhtar Faruqui FXStreet

Silver price (XAG/USD) retraces its recent gains registered in the previous session, trading around $36.30 per troy ounce during the Asian hours on Friday. A bullish bias is prevailing as the technical analysis of the daily chart shows the price of the precious metal remains within an ascending channel pattern.

The Silver price is remaining above the nine-day Exponential Moving Average (EMA), further highlighting that the short-term momentum is stronger. Additionally, the 14-day Relative Strength Index (RSI) hovers slightly below the 70 level after retreating from higher levels, indicating a prevailing bullish bias while also suggesting the potential for a continued downward correction.

The XAG/USD pair may test the immediate barrier at $36.89, the highest since February 2012. A break above this level may strengthen the bullish bias and support the pair to approach the upper boundary of the ascending channel around $38.50.

Silver price is testing the ascending channel’s lower boundary around $36.10, followed by the nine-day EMA at $35.77. A break below this crucial support zone could weaken the short-term price momentum and put downward pressure on the 50-day EMA at $33.74.

A successful breach below the 50-day EMA could dampen the medium-term price momentum and prompt the price of the precious metal to navigate the region around the two-month low at $31.65, which was recorded on May 15.

XAG/USD: Daily Chart

Silver FAQs

Why do people invest in Silver?

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.

Which factors influence Silver prices?

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.

How does industrial demand affect Silver 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.

How do Silver prices react to Gold’s moves?

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

Akhtar Faruqui

FXStreet

Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.

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