Silver Price Forecast: XAG/USD wavers near $36.00 with all eyes on US jobs data
- Silver keeps treading water above $36.00, lacking any clear bias.
- Investors are awaiting further US employment data to better assess the chances of Fed easing..
- XAG/USD needs to break support at $35.40 or other $37.35 resistance.
Silver (XAG/USD) is trading back and forth near the $36.00 level with investors showing hesitation and awaiting further data about the US labour market for a more accurate assessment of the timing of Fed rate cuts.
US Job Openings beat expectations on Tuesday, and the ISM Manufacturing PMI highlighted a significant improvement in the sector’s business activity. These data, and Fed Powell’s cautious tone provided some support to the US Dollar on Tuesday.
Technical Analysis: XAG/USD is looking for direction around $36.00
Technical indicators show a hesitant market, underscored by the Doji candles in the daily chart, while the 4-hour RSI keeps fluctuating around the 50 level, suggesting a lack of clear bias.
The precious metal remains trading within the last three weeks’ range, between $35.40 and $37.35, consolidating gains following a sharp rally from early May lows.
On the downside, a break of the mentioned $35.40 level would confirm a bearish H&S pattern, a common signal of trend shifts, and increase pressure towards $34.10 (June 4 low) and the pattern’s measured target, at $33.43.
The area between $36.60 and $36.85 June 26, July 1 highs) is holding bulls for now and closing the path to the June 18 high, at $37.35.
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
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.
