Silver Price Forecast: XAG/USD corrects lower from $67.00 resistance area
- XAG/USD retreats below $64.50 following rejection ahead of the $67.00 resistance area.
- Precious metals dip on Tuesday as the US-Iran peace talks stall and Oil prices bounce up.
- Fed Hammack's hawkish comments provided a fresh boost to the USD on Monday.
Silver (XAG/USD) trades lower on Tuesday, retreating to levels below $64.50, after rejection at seven-week highs around $66.60 on Monday. A more cautious market mood, as the peace negotiations between the US and Iran stall, and hawkish comments from Federal Reserve (Fed) officials are providing some support to the US Dollar.
Precious metals are struggling on Tuesday as the US and Iran fail to reach an agreement to reopen the Strait of Hormuz, which drives away hopes of a swift peace deal and pushes Oil prices higher.
Apart from that, Cleveland Federal Reserve (Fed) President Beth Hammack, affirmed on Monday that the current monetary policy "is not hurting the economy" and that the bank will have to hike rates more than once to bring inflation back to target. These comments triggered some hopes of a September rate hike, although investors await the US Consumer Prices Index (CPI) reading, due on Wednesday, for confirmation.
Technical Analysis: Key support is at the $63.30 area
XAG/USD has reached the target of the bullish Head & Shoulders (H&S) pattern in the $67.00 area, before correcting to the mid-range of the $64.00s. Momentum indicators in the daily chart have eased but remain within bullish territory, with the Relative Strength Index (RSI) near 60 and the Moving Average Convergence Divergence (MACD) indicator above zero.
Bears are likely to be tested at the previous resistance area, now turned support, around $63.30. A confirmation below here would shift the focus towards the August 6 and 7 low, around $61.00, ahead of the broken H&S neckline, now around $51.55.
On the topside, initial resistance appears at the two-month high of $67.17 ahead of a more critical barrier formed by the 200-day SMA at $71.38 and the mid-June highs around $71.50.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
