Silver Price Prediction: XAG/USD sticks to modest gains near $27.65-70 area, 23.6% Fibo.

• Silver attracts buyers for the second straight day and moves away from a multi-month low.

• The technical setup supports prospects for the emergence of fresh selling at higher levels. 

• A sustained move beyond the 100-day SMA and $29.00 is needed to negate the bearish bias.

Silver (XAG/USD) builds on the overnight goodish rebound from the $26.45 area, or a three-month low and scales higher for the second successive day on Friday. The white metal climbs to a four-day peak, around the $27.75 region during the Asian session, though the positive momentum runs the risk of fizzling out rather quickly. 

From a technical perspective, the XAG/USD pauses near the 23.6% Fibonacci retracement level of the July-August downfall. The said barrier should now act as a key pivotal point, which if cleared might trigger a short-covering rally and lift the XAG/USD beyond the $28.00 mark, towards the 38.2% Fibo. level around the $28.50-$28.55 region. That said, oscillators on the daily chart – though have recovered from lower levels – are still holding deep in negative territory. 

Hence, any further move up is likely to confront stiff resistance and remain capped near the 100-day Simple Moving Average (SMA) support breakpoint, around the $28.75-$28.80 zone. This is followed by the $29.00 mark, which if cleared decisively will negate the negative outlook. The XAG/USD might then climb to the $29.45 intermediate hurdle en route to the 61.8% Fibo. level, around the $29.75 region and eventually aim to reclaim the $30.00 psychological mark.

On the flip side, the $27.30-$27.25 area now seems to protect the immediate downside ahead of the $27.00 mark. Any further decline might continue to find strong support near the $26.50-$26.45 area, or a multi-month low touched on Wednesday. Some follow-through selling, however, will be seen as a fresh trigger for bears and drag the XAG/USD to the May monthly swing low, around the $26.00 mark. The next relevant support is pegged near the $25.60 horizontal zone, below which the commodity could fall to the $25.00 psychological mark.

Silver 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.