Silver Price Forecast: XAG/USD slides below $32.00; downside potential seems limited
- Silver kicks off the new week on a weaker note and snaps a three-day winning streak.
- The technical setup supports prospects for the emergence of dip-buyers near $31.30.
- Bulls might wait for a move beyond the 200-period SMA on 4H before placing fresh bets.
Silver (XAG/USD) attracts some sellers at the start of a new week and slides back below the $32.00 round-figure mark during the Asian session on Monday. The white metal, for now, seems to have snapped a three-day winning streak to over a one-week high touched on Friday, though the technical setup supports prospects for the emergence of some dip-buying at lower levels.
Last week's breakout beyond the 50% Fibonacci retracement level of the recent slump from the March swing high to a fresh year-to-date low touched last week was seen as a key trigger for bullish traders. The subsequent move high, however, struggles to find acceptance above the 61.8% Fibo. level. Moreover, oscillators on the daily chart are yet to confirm the positive outlook and warrant some caution before positioning for any meaningful upside.
Hence, it will be prudent to wait for some follow-through buying beyond the 200-period Simple Moving Average (SMA) on the 4-hour chart, currently pegged around the $32.55-$32.60 region, before placing fresh bullish bets. The XAG/USD might then aim to reclaim the $33.00 mark and climb further to the 78.6% Fibo. level, around the $33.20 area, en route to the $33.50-$33.55 horizontal barrier and the $34.00 neighborhood, or March swing high.
On the flip side, any further pullback is likely to find decent support and remain cushioned near the $31.35-$31.30 region, or the 50% Fibo. level. A convincing break below, however, might prompt some technical selling and drag the XAG/USD further below the $31.00 round-figure mark, towards the $30.55 area, or the 38.2% Fibo. level. The downward trajectory could extend towards the $30.00 psychological mark en route to the $29.55 region (23.6% Fibo.).
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.