- Silver once again finds some support and attracts buyers near the $32.20 area.
- The formation of a bullish flag pattern supports prospects for additional gains.
- Any meaningful slide could be seen as a buying opportunity and remain limited.
Silver (XAG/USD) attracts some dip-buyers near the $32.20 area during the Asian session on Friday and climbs to a fresh daily high in the last hour. The white metal, however, remains well within the previous day's broader trading range and currently trades just above mid-$32.00s, up over 0.25% for the day.
From a technical perspective, the recent price action along a downward sloping channel constitutes the formation of a bullish flag pattern against the backdrop of a goodish recovery from the $28.45 area, or the year-to-date low touched in April. Moreover, oscillators on daily/hourly charts are holding in positive territory, suggesting that the path of least resistance for the XAG/USD is to the upside.
Any subsequent move up, however, is likely to confront some resistance ahead of the $33.00 round figure or the overnight swing high. This is closely followed by the top boundary of the descending channel, currently around the $33.15 zone, above which the XAG/USD could accelerate the move higher towards the $33.70 intermediate hurdle before bulls aim to reclaim the $34.00 mark.
On the flip side, the $32.25-$32.20 region now seems to have emerged as an immediate strong support. Any further weakness, leading to a subsequent break below the $32.00 mark, could expose the descending channel support near the $31.50-$31.45 zone. The latter should act as a pivotal point, which, if broken, will negate the constructive setup and shift the near-term bias in favor of bearish traders.
Silver 4-hour chart
(This story was corrected on May 9 at 08:51 GMT to say that the XAG/USD could accelerate the move higher above the $33.15 zone, not below)
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.
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