Silver price gained more than 3% as the white metal reclaimed the 200-day simple moving average (SMA) of $68.59 due to geopolitical news related to the US-Iran conflict. Broad US dollar weakness and falling oil prices pushed XAG/USD above the $70.00 mark for the first time in the past five days.
XAG/USD Price Forecast: Technical Outlook
Silver appears to have formed a ‘double bottom’ chart pattern, which could open the door to further gains if the white metal remains above its 200-day SMA. Still, momentum remains a bit bearish, as indicated by the Relative Strength Index (RSI), but it is aiming higher, suggesting buyers are on the move.
If XAG/USD surpasses the $70.50 mark, look for a test of the 20-day SMA at $72.42. Above this level there is a 50-day SMA at $75.36, followed by a 100-day SMA at $79.29. Once silver surpasses those two levels, the next stop will be the May 13 high at $89.36.
On the downside, the first support for silver will be the 200-day SMA at $68.59. A breach of the latter would expose the psychological figure of $65.00. Below this level, the next area of interest is the June 11 cycle low at $61.51.
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 free 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.
