Silver Price Forecast: XAG/USD treads water above $42.00 near 14-year highs
- Silver price remains close to the 14-year high at $42.46, reached on September 12.
- The 14-day Relative Strength Index (RSI) is holding above the 70 mark, suggesting Silver is trading in overbought territory.
- The psychological level of $42.00 appears as the initial support.
Silver price (XAG/USD) maintains its position after registering more than 1.5% gains in the previous session, trading around $42.20 per troy ounce during the European hours on Monday. The technical analysis of the daily chart suggests the price of the precious metal moves upwards within an ascending channel pattern, indicating that market bias is bullish.
The XAG/USD pair remains above the nine-day Exponential Moving Average (EMA), indicating that short-term price momentum is strengthening. The 14-day Relative Strength Index (RSI) is positioned slightly above the 70 level, suggesting that the Silver price is trading within overbought territory and a potential for a downward correction. However, the strong uptrend persists with buyers firmly in control.
On the upside, the XAG/USD pair may target the $42.46, the highest since September 2011, reached on September 12. A successful break above this level would lead the Silver price to explore the region around the upper boundary of the ascending channel, around $43.50.
The initial support lies at the psychological level of $42.00. Further declines would prompt the Silver price to test the nine-day EMA at $41.33, followed by the ascending channel’s lower boundary around $40.80. A break below the channel would weaken the bullish bias and put downward pressure on the Silver price to navigate the area around the 50-day EMA of $38.89.
XAG/USD: 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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