Silver Price Forecast: XAG/USD dips below $66.00 and hints at a bearish “H&S”
- XAG/USD hits session lows at $65.46, following Friday's reversal from $68.00.
- Strong US NFP data boosts hopes of a Fed rate hike this week and weighs on precious metals.
- Recent price action shows a potential bearish "Head & Shoulders" pattern in progress.
Silver (XAG/USD) nudges lower on Monday, hitting session lows in the mid-$65.00s after a reversal from the $68.00 area. Precious metals are struggling on Monday, as US Nonfarm Payrolls (NFP) figures beat expectations last Friday, boosting hopes that the US Federal Reserve (Fed) will hike rates next week, although the market awaits Friday’s Consumer Price Index (CPI) release for confirmation.
US NFP figures showed a 162K increase in net employment in August, well above the 57K forecasted by market analysts, easing concerns about a softening labour market. The data prompted investors to ramp up bets on a Fed rate hike at the September 15-16 monetary policy meeting to a 58% chance, from around 50% before the release, according to data from the CME FedWatch Tool.
Analysts at ING point to Friday’s August CPI release as the main focus this week, where they see “month-on-month readings at 0.4% and 0.2% for headline and core (inflation) should be enough to sway the Fed towards a 25bp rate hike on 16 September,” a move they note is “just priced with a 58% probability at the moment.”
Technical Analysis: The neckline of a H&S formation lies around $63.30
XAG/USD trades at $65.79, keeping a bearish near-term tone as it holds well below the 200-day simple moving average (SMA). Friday's reversal from $68.00 looks like the second shoulder of a bearish Head & Shoulders (H&S) formation, while momentum indicators in the daily chart highlight growing bearish pressure.
The 14-period Relative Strength Index (RSI) is hovering near a neutral 52 zone, and the Moving Average Convergence Divergence (MACD) stays in negative territory, which suggests that upside attempts could remain capped.
On the downside, the pair might find support at Friday's low near $64.75, although the key level is the September 2 low, at $63.30, which would confirm the H&S pattern and add pressure toward the August 6 low, near $61.00.
On the topside, initial resistance emerges at a previous support area around $67.50, which held bulls on Friday. Further up, the mid-June highs around $71.60 and the 200-day SMA at $72.90 are likely to pose a significant challenge for bulls.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.