Silver Price Forecast: XAG/USD tumbles to near $28.70 as US Dollar recovers ahead of US data


  • Silver price faces a sharp sell-off near the weekly high at $29.16 as the US Dollar recovers strongly.
  • An unexpected contraction in the Caixin Manufacturing PMI for July has also weighed on the Silver price.
  • The Fed signaled rate cuts in September amid cooling inflationary pressures and easing labor market strength.

Silver price (XAG/USD) falls sharply to near $28.70 in Thursday’s European session after posting a fresh weekly high at $29.16. The white metal drops as the US Dollar (USD) rebounds strongly, and the Caixin Manufacturing PMI surprisingly contracted in July.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, jumps higher to near 104.35 after rebounding from a weekly low of 103.86. A sharp recovery in the US Dollar has made investment in Silver expensive for investors.

Apart from that, unexpected decline in the Caxin Manufacturing PMI to 49.8 from expectations of 51.5 and the prior release of 51.8 has weighed on the Silver price. Silver as a metal has application in various industries such as renewable energy and electric vehicles etc. And, a slowdown in China’s manufacturing sector raises concerns over Silver demand.

However, firm speculation that the Federal Reserve (Fed) will start reducing interest rates in September will keep the downside limited. The Fed left interest rates unchanged in the range of 5.25%-5.50% on Wednesday, as expected, and his acknowledgment of cooling price pressures and easing labor market strength pointed to expectations of rate cuts sooner rather than later.

Going forward, investors will focus on the United States ISM Manufacturing PMI and Nonfarm Payrolls (NFP) report for July, which will be published at 14:00 GMT and on Friday, respectively.

Silver technical analysis

Silver price hovers at make or a break near the horizontal resistance plotted from June 13 low at $28.66 on a four-hour timeframe. The asset climbs above the 50-period Exponential Moving Average (EMA) near $28.70, suggesting that the near-term trend is upbeat.

The 14-period Relative Strength Index (RSI) moves higher above 60.00. If the RSI sustains above 60.00, the momentum will shift to the upside.

Silver four-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.

 

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

EUR/USD regains 1.0300 ahead of Trump’s inauguration

EUR/USD regains 1.0300 ahead of Trump’s inauguration

EUR/USD regains 1.0300 in the European session on Monday. The pair benefits from the market optimism-led US Dollar weakness as traders brace for the highly anticipated President-elect Donald Trump’s inauguration later in the holiday-thinned day. 

EUR/USD News
GBP/USD battles 1.2200, awaits Trump 2.0

GBP/USD battles 1.2200, awaits Trump 2.0

GBP/USD is battling 1.2200 in European trading, paring back gains. A broadly weaker US Dollar underpins the pair but markets turn cautious ahead of US President-elect Donald Trump's inauguration, capping its upside. 

GBP/USD News
Gold price sticks to modest gains above $2,700 amid renewed USD selling

Gold price sticks to modest gains above $2,700 amid renewed USD selling

Gold price attracts some dip-buyers at the start of a new week and builds on its steady intraday ascent through the early European session. The US Dollar attracts fresh sellers and erodes a major part of Friday's positive move amid bets that the Fed will cut interest rates twice this year. 

Gold News
Three fundamentals for the week: Trump's inauguration casts a long shadow on markets

Three fundamentals for the week: Trump's inauguration casts a long shadow on markets Premium

Shock and awe? Incoming United States (US) President Donald Trump enters the White House on Monday, and markets brace for a storm. Headlines from the Oval Office will likely dominate trading, but there are two other things to watch.

Read more
Five keys to trading Trump 2.0 with Gold, Stocks and the US Dollar

Five keys to trading Trump 2.0 with Gold, Stocks and the US Dollar Premium

Donald Trump returns to the White House, which impacts the trading environment. An immediate impact on market reaction functions, tariff talk and regulation will be seen. Tax cuts and the fate of the Federal Reserve will be in the background.

Read more
Trusted Broker Reviews for Smarter Trading

Trusted Broker Reviews for Smarter Trading

VERIFIED Discover in-depth reviews of reliable brokers. Compare features like spreads, leverage, and platforms. Find the perfect fit for your trading style, from CFDs to Forex pairs like EUR/USD and Gold.

Read More

Forex MAJORS

Cryptocurrencies

Signatures