Silver slumps over 5% as US data fuels risk-on mood, extends metals rout
- Silver falls more than 5% as improved US data boosts risk appetite and weighs on safe-haven demand.
- XAG/USD trades near $80.40, with momentum turning bearish as RSI signals growing downside pressure.
- Bears need a break below $80.00 to target the 50-day SMA near $75.62.
Silver price registers losses of over 5% on Monday as the precious metals liquidation continued for the second straight day. Upbeat economic data in the US improved risk appetite to the detriment of the grey metal. At the time of writing, XAG/USD trades at $80.40 below its opening price.
XAG/USD Price Forecast: Technical outlook
Silver prices seem poised to consolidate within the $80-$85 range after the precious metal cleared the latest higher high of $85.87, December’s 29 peak. A breach of the latter will open the door to challenge the $90.00 mark in the near term.
Momentum as measured by the Relative Strength Index (RSI) turned bearish, yet sellers must clear the $80.00 mark, so they can remain hopeful of pushing prices toward the 50-day Simple Moving Average (SMA) at $75.62.
On the other hand, if buyers regain $90.00, the next resistance would be the $95.00 figure. Upwards attention turns to the $100.00 mark, which was initially broken on January 23.
XAG/USD Price Chart – Daily
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
Christian Borjon Valencia
FXStreet
Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.
