Silver Price Analysis: XAG/USD bulls now await sustained breakout through 100-day SMA

• Silver attracts some follow-through buying for the second straight day on Wednesday.
  
• The mixed technical indicators on hourly/daily charts warrant some caution for bulls. 

• A break below the $28.00 mark is needed to negate any near-term positive outlook.

Silver (XAG/USD) scales higher for the second straight day on Wednesday and climbs to a multi-day peak during the Asian session on Wednesday. The white metal is currently trading around the $28.60 region, with bulls now looking to build on the momentum beyond the 100-day Simple Moving Average (SMA) support breakpoint-turned-resistance.

An intraday move beyond the 23.6% Fibonacci retracement level of the recent corrective decline from the $31.75 region, or the July monthly swing high, could be seen as a trigger for bullish traders. Moreover, oscillators on the 4-hour chart have been gaining positive traction and support prospects for a further intraday appreciating move. That said, technical indicators on the daily chart – though have recovered from lower levels – are still far away from confirming a positive outlook.

Hence, any subsequent move up is more likely to confront stiff resistance and remain capped near the $29.00 round-figure mark, which coincides with the 38.2% Fibo. level and should act as a key pivotal point. A sustained strength beyond, meanwhile, will suggest that the recent downfall witnessed over the past two weeks or so has run its course and lift the XAG/USD towards the next relevant hurdle near the $29.45-$29.50 supply zone, or last week's swing high and the 50% Fibo. level.

Some follow-through buying should pave the way for a move back towards reclaiming the $30.00 psychological mark, or the 61.8% Fibo. level. The momentum could extend further towards the 78.6% Fibo. level, around the $30.75-$30.80 region, before the XAG/USD eventually aims to retake the $31.00 round figure and test the monthly swing high, around the $31.75 zone.

On the flip side, the $28.30-$28.25 region, or the 23.6% Fibo. level now seems to protect the immediate downside ahead of the $28.00 mark. A convincing break below the latter will expose the $27.40-$27.30 zone, or the lowest level since May 9 touched on Monday. The next relevant support is pegged near the $27.00 mark, below which the XAG/USD could accelerate the fall to the $26.60-$26.55 support en route to the 200-day SMA, just below the $26.00 mark.

Silver 4-hour 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.