Silver halts its advance and plunges over 2% on Wednesday amid growing speculation that a resumption of hostilities between the US and Iran—which exchanged fire overnight—increases the chances that major central banks will hike rates, a headwind for the non-yielding metal. The XAG/USD trades at $73.46 after peaking at nearly $75.30.
XAG/USD Price Forecast: Technical outlook
Silver continues to trade sideways within the $73.00-$78.50 range, except for reaching a four-week low of $71.79 on May 29. Price action shows that momentum is bearish, even though XAG/USD has been trading at the top/bottom of the 50-day Simple Moving Average (SMA) at $76.14, which is the first line of resistance for sellers if buyers intend to push prices higher.
The Relative Strength Index (RSI) shows that sellers are in charge, with the index pointing lower toward oversold territory.
On the downside, the first support is the $73.00, followed by the May 29 low at $71.79. Below this area sits the 200-day SMA at $67.47.
For a bullish reversal, Silver must clear the 50-day SMA and the May 26 daily high of $78.57 before challenging the 100-day SMA at $81.03.
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.