Silver Price Forecast: XAG/USD wavers above $57.00 amid a brighter market mood

Silver hesitates above $57.00 after a pullback from record highs at $58.85.
An improved market sentiment is weighing on precious metals on Tuesday.
Technical indicators suggest that a deeper correction is on the cards.

Guillermo Alcala FXStreet

Silver’s (XAG/USD) rally was capped a few pips ahead of the $59.00 line on Monday, and the pair retreated on Tuesday’s Asian session before finding support at the $56.60 area and returning to levels beyond $57.00 on the early European trading session.

A Japanese 10-year bond auction drew solid demand earlier on Tuesday, which has calmed some of the concerns raised by BoJ Governor Kazuo Ueda on Monday. Ueda affirmed that the bank is contemplating the “pros and cons” of hiking interest rates in December, which put investors on their toes and triggered a global sell-off in fixed-income, sending precious metals rallying on safe-haven demand.

Technical Analysis: A further correction is on the cards

The 4-hour chart shows XAG/USD trading $57.06, posting moderate losses on the daily chart. Downside attempts have found support above the $56.60 area, while $57.50 is holding bulls so far. The Moving Average Convergence Divergence (MACD) dips below the zero level, with the MACD line crossing below the signal line, underscoring the growing bearish momentum. The Relative Strength Index (RSI) is pulling down from overbought levels in a move consistent with a consolidative pause.

Immediate support is at Monday's low of $56.58, with the trendline support from mid-November lows, now at the $55.40 area, likely to attract sellers. Below here, the 38.2% Fibonacci retracement of the recent rally to record highs is at $55.04.

Bulls, on the contrary, would have to clear the intraday high at the $57.50 area to retest Monday´s high at $58.85. Further up the psychological $60.00 level emerges as the next target.

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.

(The technical analysis of this story was written with the help of an AI tool)

Author

Guillermo Alcala

FXStreet

Graduated in Communication Sciences at the Universidad del Pais Vasco and Universiteit van Amsterdam, Guillermo has been working as financial news editor and copywriter in diverse Forex-related firms, like FXStreet and Kantox.

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