XAG/USD Price Forecast: Defends bearish flag support near mid-$59.00s

Silver remains on the back foot for the third consecutive day on Wednesday.
The technical setup favors bears and backs the case for further depreciation.
A break below channel support is needed to reinforce the negative outlook.

Haresh Menghani FXStreet

Silver (XAG/USD) trades with a negative bias for the third straight day and hovers around the $59.80 region during the Asian session on Wednesday. The white metal, however, defends a support marked by the lower boundary of a short-term descending channel, around mid-$59.00s or the weekly low, touched on Tuesday.

Looking at the broader picture, the downward-sloping channel constitutes the formation of a bearish flag against the backdrop of the recent decline. Moreover, the recent repeated failures near the 100-period Simple Moving Average (SMA) on the 4-hour chart suggest that the path of least resistance for the XAG/USD pair is to the downside.

Adding to this, the latest Moving Average Convergence Divergence (MACD) reading at -0.33 and a Relative Strength Index (RSI) around 44.16 hint at the risk of further downside within the range. However, a convincing break below the channel support is needed to reaffirm the negative bias and back the case for any further depreciation.

The XAG/USD might then weaken below the $59.00 mark, towards testing the next relevant support near the $58.35-$58.30 zone and the $58.00 mark. The downward trajectory could extend further towards the $57.25 region en route to the $57.00 mark and the year-to-date low, around the $55.70 area, touched in June.

On the topside, initial resistance appears at the 100-period SMA at $62.32, with a break above exposing the upper channel line at $64.21 as the next hurdle. Only a sustained move over these barriers would ease current bearish pressure and pave the way for some meaningful upside in the near term.

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

XAG/USD 4-hour chart

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.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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