Silver Price Forecast: XAG/USD flat lines around $38.00 as traders seem non-committed

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Silver (XAG/USD) attracts some dip-buying during the Asian session on Friday and stalls the previous day's retracement slide from the $38.70-$38.75 area, or a three-week high. The white metal climbs back above the $38.00 mark in the last hour, though it lacks bullish conviction.

Silver stalls the overnight pullback from a multi-week high, though it lacks bullish conviction.
Mixed technical indicators warrant some caution before placing aggressive directional bets.
Acceptance below the 200-hour SMA should pave the way for some meaningful downfall.

The XAG/USD continues to show resilience below the 200-hour Simple Moving Average (SMA) and rebounds from the vicinity of a nearly two-week-old ascending channel support. That said, mixed oscillators on hourly/daily charts warrant some caution before placing fresh bullish bets around the commodity and resumption of the recent uptrend from the monthly low.

Hence, any subsequent move up is more likely to confront stiff resistance near the $38.20-$38.25 region. A sustained strength beyond the latter, however, should lift the XAG/USD to the $38.50-$38.55 intermediate hurdle en route to the multi-week top, around the $38.75 zone. The momentum could extend further and allow bulls to reclaim the $39.00 round-figure mark.

On the flip side, weakness below the $37.80 region could drag the XAG/USD to the next relevant support near mid-$37.00s en route to the $37.00 neighborhood. Some follow-through selling would be seen as a fresh trigger for bearish traders and set the stage for deeper losses, towards retesting the monthly swing low, around the $36.20 region.

Silver 1-hour 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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