Silver Price Forecast: XAG/USD seems vulnerable below mid-$31.00s

Silver struggles to capitalize on the previous day’s goodish rebound from a three-week low.
The technical setup favors bears and supports prospects for a further near-term downfall.
A sustained strength above the $32.30-$32.35 area is needed to negate the negative bias.

Silver (XAG/USD) meets with a fresh supply on Friday and reverses a major part of the previous day's goodish recovery move from over a three-week low. The white metal continues losing ground through the first half of the European session and touches a fresh daily low, around the $31.30 area in the last hour.

From a technical perspective, any further decline is likely to find some support near the $31.00 mark ahead of the $30.85-$30.80 region, or the multi-week low. Some follow-through selling below the 50% Fibonacci retracement level of the August-October rally, around the $30.65-$30.60 area, will be seen as a fresh trigger for bearish traders.

Given that oscillators on the daily chart have just started gaining negative traction, the subsequent fall could drag the XAG/USD below the 100-day Simple Moving Average (SMA), currently pegged around the $30.25 area, towards the $30.00 psychological mark. The downward trajectory could extend to the 61.8% Fibo. level, near the $29.65 region.

On the flip side, the $32.00 round figure now seems to have emerged as an immediate strong hurdle. This is followed by a hurdle near the $32.30-$32.35 horizontal zone, which if cleared decisively might trigger a short-covering move to the $33.00 mark before the XAG/USD extends the positive momentum towards the next relevant barrier near the mid-$33.00s.

Silver daily chart

Silver FAQs

Why do people invest in Silver?

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.

Which factors influence Silver prices?

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.

How does industrial demand affect Silver 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.

How do Silver prices react to Gold’s moves?

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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