Silver Price Analysis: XAG/USD bears have the upper hand, break below mid-$26.00 awaited
- Silver turns lower for the third straight day, albeit holds above a multi-month trough.
- The technical setup favors bearish traders and supports prospects for deeper losses.
- A sustained strength beyond the $ 27.55-$27.60 might trigger a short-covering rally.
Silver (XAG/USD) meets with some supply following an intraday uptick to the $27.25-$27.30 region and turns lower for the third successive day during the first half of the European session on Wednesday. The white metal, however, manages to hold its neck above a three-month low touched on Monday and currently trades around the $27.00 round-figure mark.
Against the backdrop of the recent beak down through the very important 200-day Simple Moving Average (SMA) and failures near the $29.00 mark, the emergence of fresh selling favors bearish traders. Moreover, technical indicators on the daily chart are holding deep in negative territory and are still far from being in the oversold zone. This, in turn, validates the negative outlook and suggests that the path of least resistance for the XAG/USD is to the downside.
Traders, however, might wait for some follow-through selling below the weekly low, around mid-$26.00s, before positioning for the next leg of a downfall. The XAG/USD might then accelerate the slide towards the $26.00 round figure before dropping to the next relevant support to the $25.65-$25.60 region. The downward trajectory could extend further towards challenging the $25.00 psychological mark en route to the $24.45-$24.40 horizontal support.
On the flip side, any meaningful recovery attempt is likely to confront stiff resistance near the overnight swing high, around the $27.55-$27.60 region. A sustained strength beyond, however, might trigger a short-covering rally and lift the XAG/USD beyond the $28.00 round-figure, towards challenging the 200-day SMA support-turned-resistance, currently pegged near the $28.80 area. The $29.00 mark, meanwhile, might continue to cap the upside.
Silver daily chart
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
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
