Silver Price Forecast: XAG/USD tumbles to near $32.50 as USD strives to gain ground
- Silver price corrects to near $32.50 as the US Dollar attracts some bids on progress in US-Japan trade talks.
- Fed Powell supports interest rates remaining unchanged until the central bank gains greater clarity.
- The US-China tariff war will keep the downside in the Silver price limited.
Silver price (XAG/USD) falls sharply to near $32.50 in Thursday’s European session after failing to extend a 10-day rally above the key resistance of $33.00. The white metal corrects as the US Dollar (USD) strives to gain ground near its recent lows. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, attracts some bids near its three-year low of 99.00.
The USD Index rebounds slightly as decent progress in negotiations on a trade deal between the United States (US) and Japan has eased some uncertainty over the domestic economic outlook. “A Great Honour to have just met with the Japanese Delegation on Trade. Big Progress!” US President Donald Trump wrote in a post on Truth.Social platform on Wednesday.
This appears to be a meaningful sign that Trump wants favorable bilateral trades over hefty reciprocal tariff policies. More positive outcomes of trade negotiations by Washington with other trading partners will be favorable for the US Dollar. Such a scenario will diminish the global economic uncertainty, which would lead to a decline in demand for safe-haven assets, such as Silver.
Additionally, slight hawkish commentary from Federal Reserve (Fed) Chair Jerome Powell on the monetary policy outlook has also forced traders to book profits in the Silver price. On Wednesday, Powell said in a speech at the Economic Club of Chicago that the Fed seeks more clarity on the economic outlook before making any policy adjustments. Fed’s support for a restrictive monetary policy stance bodes poorly for non-yielding assets, such as Silver.
Meanwhile, the escalated trade war between China and the US will keep the downside in the Silver price limited. Beijing has shown a willingness for trade talks with Washington, but with respect and mutual understanding.
Silver technical analysis
Silver price holds above the 20-day Exponential Moving Average (EMA) near $32.28, suggesting that the near-term outlook is bullish. The white metal aims to revisit the October 22 high of $34.87.
The 14-day Relative Strength Index (RSI) delivers a V-shape recovery after turning oversold below 30.00. The momentum oscillator is expected to find resistance near 60.00.
A fresh upside would appear in the counter if the Silver price breaks above the April 16 high of $33.12. The move will unlock targets of the October 22 high of $34.87 and an over-decade high of $35.50.
On the flip side, a downside move by the Silver price below the April 14 low of $31.74 will expose it to the April 11 low of $30.90, followed by the psychological level of $30.00
Silver daily chart
Silver FAQs
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.
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.
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.
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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