Silver Price Forecast: XAG/USD jumps above $108 as trade war fuels 'Sell America' flows

XAG/USD Price Forecast: Technical outlook

Silver’s technical picture shows a parabolic uptrend, but it seems that buyers are losing steam, following a run-up near $118.00 on Monday. The day ended at $108.52, forming a 'huge shooting star,' a bearish candle.

Worth noting that the Relative Strength Index (RSI), although showing signs that buyers remain in charge, diverges from price action. The latter had achieved a series of higher highs, contrary to the RSI, which registered lower highs. Therefore, a negative divergence looms and could pave the way for a retracement.

For a bullish continuation, traders must clear $110.00 to remain hopeful for higher prices. Otherwise, a pullback looms, and it could be exacerbated if Silver prices drop below the $100.00 mark.

In that event, the first support for XAG/USD would be the January 23 daily low at $96.14, followed by the January 21 swing low at $90.46.

XAG/USD Price Chart – Daily

(This story was corrected on January 27 at 20:03 GMT to say that the Silver closing price on Monday was $108.52.)

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.