The price of silver (XAG/USD) declined 0.16% on Friday, consolidating around the $75.00-$76.00 area and remaining almost unchanged, close to the 50-day simple moving average (SMA) at $75.70.
XAG/USD Price Forecast: Technical Outlook
Silver looks ready to extend its consolidation after breaking below the support trend line of the ascending channel and the 50-day SMA, but the white metal has reclaimed the $75.00 mark.
The RSI turned bearish in mid-May and has remained at persistently low levels, suggesting sellers are building momentum, but the index flattened out before the weekend.
Above, the first resistance for XAG/USD is the 20-day SMA at $77.92, followed by $78.00. A breach of the latter would expose the 100-day SMA at $81.15.
A break below the psychological level of $75.00 opens the door to additional downside.
If XAG/USD falls below the May 19 low $73.09, the next support is the April 29 low $70.87. A deeper decline would expose the 200-day SMA at $65.97, followed by a yearly low at $61.02.
XAG/USD Price Chart – Daily
Silver FAQ
Silver is a precious metal that is highly traded among investors. Historically it has been used as a store of value and medium of exchange. Although less popular than gold, traders may turn to silver to diversify their investment portfolios, for its intrinsic value, or as a potential hedge during high inflation periods. Investors can purchase physical silver in coins or bars, or trade it through vehicles such as exchange traded funds, which track its price in international markets.
Silver prices may increase due to many factors. Geopolitical instability or fears of a deep recession may cause the price of silver to rise due to its safe-haven status, although to a lesser extent than gold. As a yield asset, silver tends to rise with low interest rates. Its movement also depends on how the US dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong dollar keeps the price of silver in check, while a weak dollar will likely push prices higher. Other factors such as investment demand, mining supply – silver is much more abundant than gold – and recycling rates can also influence prices.
Silver is widely used in industry, especially in areas such as electronics or solar energy, because it has the highest electrical conductivity of all metals – even higher than copper and gold. An increase in demand can cause prices to rise, while a decline can cause prices to decrease. Dynamics in the US, Chinese and Indian economies can also contribute to price fluctuations: for the US and especially China, their large industrial sectors use silver in a variety of processes; In India, consumer demand for the precious metal for jewelery also plays an important role in determining prices.
Silver prices follow the movement of gold. When gold prices rise, silver usually follows, as they have the same status as a safe-haven asset. The gold/silver ratio, which shows the number of ounces of silver required to equal the value of one ounce of gold, can help determine the relative valuation between the two metals. Some investors may consider a high ratio as an indicator that silver is undervalued, or gold is overvalued. Conversely, a low ratio may indicate that gold is less valuable than silver.
