Silver Price Analysis: XAG/USD seems vulnerable near mid-$29.00s, over two-week low
- Silver drifts lower for the third straight day on Friday and drops to over a two-week low.
- The technical setup favors bearish traders and supports prospects for a further downfall.
- A move beyond the $30.30-$30.40 support-turned-resistance will negate the negative bias.
Silver (XAG/USD) remains under some selling pressure for the third successive day on Friday and touches a two-and-half-week trough during the Asian session. The white metal currently trades around the $29.55-$29.60 region, down 0.80% for the day and the technical setup supports prospects for a further near-term depreciating move.
Against the backdrop of the recent failure to build on the momentum beyond the $31.40 supply zone, this week's breakdown through a short-term trading range support was seen as a fresh trigger for bearish traders. Moreover, oscillators on the daily chart have just started gaining negative traction and suggest that the path of least resistance for the XAG/USD remains to the downside.
Hence, a subsequent slide towards testing the next relevant support near the $29.15 region, en route to the $29.00 mark, looks like a distinct possibility. Some follow-through selling below the latter might expose the June monthly swing low, around the $28.60-$28.55 area. The XAG/USD could eventually drop to the 100-day Simple Moving Average (SMA), currently pegged near the $28.00 mark.
On the flip side, any attempted recovery might confront some hurdle near the Asian session peak, around the $29.80 region. This is closely followed by the $30.00 psychological mark, above which a bout of a short-covering move could lift the XAG/USD back to the $30.30-$30.40 trading range support breakpoint, now turned resistance. The momentum could extend towards the $31.00 round figure.
A sustained strength beyond the latter will negate any near-term negative bias and lift the XAG/USD back towards the $31.40 supply zone. Some follow-through buying, leading to a subsequent move beyond the monthly peak, around the $31.80 area, should allow bulls to retake the $32.00 mark and challenge the YTD peak, near the mid-$32.00s touched in May.
Silver 4-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.