Silver Price Forecast: XAG/USD edges low as path turns bearish
- Silver price drops below $27.00, closing lower for the second consecutive day.
- Bearish momentum with key support at $26.00 and possible 200-DMA test at $26.04.
- Resistances to monitor: $27.00, $28.00, 100-DMA at $28.69, with further at $29.00 and 50-DMA at $29.63.
Silver price dropped some 0.99% on Tuesday and achieved a daily close below $27.00 for the second straight day, which could exacerbate further losses. The grey metal remains pressured by high US yields and a stronger US Dollar but remains boosted by rising tensions in the Middle East. Hence, the XAG/USD trades at $26.97 after hitting a daily high of $27.56.
XAG/USD Price Forecast: Technical outlook
Silver is neutral to downward biased after sliding below the 100-day moving average (DMA), which turned resistance at $28.59. Momentum is bearish as depicted by the Relative Strength Index (RSI), which falls steeply toward oversold conditions. Hence, the XAG/USD could test the 200-DMA at $26.04 in the short term.
In that outcome, Silver’s next support would be $26.00, the March 27 low at $24.33, and the February 28 low at $22.28. Conversely, the XAG/USD first resistance would be $27.00, If buyers reclaim the latter, the next resistance would be $28.00, followed by the 100-DMA at $28.69. A breach of the latter will expose $29.00, followed by the 50-DMA at $29.63.
XAG/USD Price Action – 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
Christian Borjon Valencia
FXStreet
Christian Borjon began his career as a retail trader in 2010, mainly focused on technical analysis and strategies around it. He started as a swing trader, as he used to work in another industry unrelated to the financial markets.
