- Silver attracts fresh buyers on Tuesday, though the setup warrants some caution for bulls.
- The overnight breakdown through the 23.6% Fibo. supports prospects for further losses.
- Bears need to wait for weakness and acceptance below the $30.90-$30.80 support zone.
Silver (XAG/USD) gains some positive traction during the Asian session on Tuesday and moves away from a multi-day low, around the $30.90-$30.85 region touched the previous day. The white metal currently trades around the $31.35 region, up 0.60% for the day, snapping a two-day losing streak and stalling its recent corrective pullback from the highest level since December 2012 touched last week.
From a technical perspective, the overnight breakdown through the 23.6% Fibonacci retracement level of the strong rally from the September monthly swing low favors bearish traders. Moreover, oscillators on the 4-hour chart have been gaining negative traction and support prospects for the emergence of some selling at higher levels. This, in turn, warrants some caution before positioning for the resumption of the recent upward trajectory witnessed over the past month or so.
That said, the overnight bounce from sub-$31.00 levels, or the vicinity of the 38.2% Fibo. level, and positive oscillators on the daily chart, suggest that the path of least resistance for the XAG/USD is to the upside. Any further move up, however, might confront resistance near the $31.80 horizontal zone ahead of the $32.00 mark. A sustained strength beyond the latter could push the XAG/USD to the $32.25 intermediate hurdle en route to the multi-year peak, around the $32.70 region.
On the flip side, the $30.90-$30.85 region, nearing 38.2% Fibo. level now seems to protect the immediate downside, below which the XAG/USD could accelerate the fall towards 50% Fibo. level, around the $30.25 area. The downward trajectory could extend further toward the $30.00 psychological mark en route to the $29.70-$29.65 confluence support – comprising the 61.8% Fibo. level and the 200-period Simple Moving Average (SMA) on the 4-hour chart.
Silver 4-hour 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.
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