- Silver drifts lower and retreats further from a 12-year peak touched on Thursday.
- The setup favors bulls and warrants caution before positioning for deeper losses.
- Any meaningful downfall is likely to attract some dip-buying and remain limited.
Silver (XAG/USD) extends the overnight modest pullback from the $32.70 area, or its highest level since December 2012 and remains under some selling pressure during the Asian session on Friday. The white metal, however, attracts some dip-buyers at lower levels and currently trades just below the $32.00 mark, down 0.25% for the day.
Meanwhile, technical indicators on the daily chart are holding comfortably in positive territory and are still away from being in the overbought zone. This, along with the recent breakout through a short-term descending trend-line resistance, favor bullish traders and suggests that the path of least resistance for the XAG/USD is to the upside. That said, Thursday's failure to build on the momentum beyond the $32.45-$32.50 region warrants some caution.
The aforementioned area might continue to act as an immediate hurdle ahead of the overnight swing high, around the $32.70 area. Some follow-through buying should pave the way for a move towards reclaiming the $33.00 mark and lift the XAG/USD further towards the $33.45 intermediate hurdle en route to the December 2012 swing high, around the $33.85 region.
On the flip side, the $31.60-$31.55 zone now seems to have emerged as an immediate support. Any further decline could be seen as a buying opportunity around the $31.25 area and remain limited near the $31.00 mark. A convincing break below the latter could drag the XAG/USD to the $30.60-$30.55 zone en route to the $30.00 psychological mark and the $29.70-$29.65 area, or the descending trend-line resistance breakpoint, now turned support.
The latter now coincides with the 100-day Simple Moving Average (SMA) and should act as a key pivotal point. Failure to defend the said support levels will suggest that the XAG/USD has topped out and pave the way for a meaningful corrective decline in the near term.
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.
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