Silver Price Forecast: XAG/USD drops toward $28.50 due to bearish bias

• Silver price may extend losses as daily chart analysis indicates a bearish bias.

• The XAG/USD pair consolidates within the descending channel pattern.

• The 14-day RSI suggests that Silver price trades within a range between $29.70-$28.70.

Silver price (XAG/USD) continues its losing streak for the third successive session, trading around $28.70 per troy ounce during the early European session on Thursday. An analysis of the daily chart indicates a bearish bias as the XAG/USD pair consolidates within the descending channel pattern.

The momentum indicator Moving Average Convergence Divergence (MACD) indicates the strengthening of bearish bias for Silver. This configuration indicates that the overall trend turns negative as the MACD line breaks below the centreline and a signal line.

The 14-day Relative Strength Index (RSI) is consolidating below the 50 level, suggesting Silver price trading within a range between $29.70-$28.70. If the RSI declines below the 30 level, it generates buy signals and indicates an oversold condition of the commodity asset.

On the downside, the Silver price may find key support around the psychological level of $28.00. A break below this level could exert pressure on the XAG/USD pair to approach the vicinity around the lower threshold of the descending channel around the level of $27.50.

In terms of resistance, the Silver price may find the immediate barrier around the nine-day Exponential Moving Average (EMA) at $29.30, followed by the significant level of $30.00.

A breakthrough above the latter could lead the price of the grey metal to reach the upper boundary of the descending channel around the level of $30.50. A breakthrough above the latter could lead the XAG/USD pair to test the four-week high of $31.55.

XAG/USD: Daily Chart

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.