Silver Price Forecasts: XAG/USD, capped below $62.00 but steady near one-month highs
- XAG/USD rally has been capped at $61.90 but keeps its near-term bullish tone intact.
- Precious metals are drawing support from lower US yields as Fed tightening bets fade.
- The technical picture shows an inverted Head and Shoulders formation.
Silver (XAG/USD) has found some resistance at the $61.90 area on Wednesday, before pulling back to $61.24 at the moment of writing, but remains above the top of the last four weeks’ range, at the $60.90 area. The white metal appreciates for the second consecutive day, supported by lower US Treasury yields, as soft US data and lower Oil prices have dampened expectations of immediate Federal Reserve rate hikes.
Analysts at MUFG observe that the US Dollar has faced renewed selling since last week’s FOMC meeting, with the “dollar index back below the 100.00-level after hitting a high at 101.64 last week.” They highlight this pullback as evidence that the latest bout of Dollar weakness has extended in the wake of the policy decision.
On Tuesday, US Factory Orders and JOLTS Job Openings missed expectations, and investors pared back hopes of a quarter-point rate hike in September to 58% from 67% a day before, according to data by the CME Group's Fed Watch Tool. The market will be attentive to the US ADP employment report due later on Wednesday and, above all, to the Nonfarm Payrolls release on Friday, to confirm those views.
Technical Analysis: A bullish Head & Shoulders pattern in progress
XAG/USD trades at $61.35 at the time of writing, on track for a nearly 6% rally over the last two days. Price action has breached the neckline of a bullish Head and Shoulders (H&S) pattern at the mid $59.00 highlighting a constructive near-term bias. Bulls, however, must breach July's top, at $63.12, to confirm a trend shift.
Momentum indicators in the 4-hour chart are supportive. The Relative Strength Index (14) hovers near 68, flirting with overbought territory, which warns about the possibility of a bearish correction. The Moving Average Convergence Divergence (MACD) indicator remains positive and continues to edge higher, reinforcing the bullish tone.
On the topside, above session highs at $61.90, the next target is the mentioned July's top, at $63.12. Further up, the H&S' measured target is around $65.65. On the downside, immediate support emerges at session lows, around $59.35, which is also the headline of the H&S formation, ahead of the late-July lows at the $56.65 area.
(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.