Silver Price Forecast: XAG/USD appreciates further and looks to $50.00

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Silver (XAG/USD) accelerated its recovery on Thursday, with precious metals trading firmer despite the US Dollar’s strength.

Silver hits new highs near $49.70 and draws closer to the 50.00 psychological level.
Political uncertainty in France and Japan is underpinning support for safe havens.
NY Fed President John Williams called for further rate cuts earlier on Thursday.

Silver (XAG/USD) accelerated its recovery on Thursday, with precious metals trading firmer despite the US Dollar’s strength. The pair has reached fresh long-term highs, near 49.70, drawing closer to the $50.00 psychological levels.

Precious metals remain bid on Thursday, fuelled by the political uncertainty in France and Japan, while the US government shutdown enters its eighth day without a solution in sight.

Earlier in the day, New York Fed President John Williams showed his support for further rate cuts, while the focus now shifts to Fed Chairman Jerome Powell and Governor Michelle Bowman, who are expected to talk at a banking event in Washington later today.

Technical analysis: The $50.00 psychological level is attracting bulls

Silver remains heading north, the pair has rallied more than 20% in the last three weeks and is looking overstretched, but the fundamental scenario remains supportive, and there are no signs of a correction other than the bearish divergence on the 4-hour RSI

The white metal bounced from $48.40 in early trading on Thursday and has reached the 49.70 area, with bulls targeting the $50.00 level, where the top of the ascending channel from the mid-September lows meets the price. Further up, the 161.8% Fibonacci extension of the early October rally is at $50.70.

On the downside, immediate support is at Wednesday’s low of $48.40 ahead of the confluence of trendline support with the October 7 lows, at $47.50, and the September 30 and October 2 lows, at the $45.90-$46.00 area.

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.