Silver Price Forecast: XAG/USD holds steady near weekly high, just below mid-$28.00s

• Silver attracts buyers for the third straight day and touches a fresh weekly top on Wednesday.
• The lack of any follow-through buying and mixed technical oscillators warrant caution for bulls.
• A sustained strength beyond the $29.00 mark is needed to support prospects for further gains.

Silver (XAG/USD) trades with a mild positive bias for the third straight day on Wednesday, albeit lacks bullish conviction and is currently placed around the $28.45 region, just below the weekly high touched during the Asian session. 

From a technical perspective, the white metal is holding above the 23.6% Fibonacci retracement level of the August-September slide and looking to build on the momentum beyond the 200-period Simple Moving Average (SMA) on the 4-hour chart. Given that oscillators on the said chart have just started gaining positive traction, though are yet to confirm a bullish bias on the daily chart. Hence, the XAG/USD is more likely to confront stiff resistance near the $28.95-$29.00 confluence – comprising the 50% Fibo. level and the 100-period SMA on the 4-hour chart.

A sustained strength beyond, however, will be seen as a fresh trigger for bullish traders and pave the way for some meaningful appreciating move. The subsequent move up has the potential to lift the XAG/USD beyond the 61.8% Fibo. level resistance near the $29.25 region, towards the $29.65 area, or the 78.6% Fibo. level. The momentum could extend further towards reclaiming the $30.00 psychological mark, above which bulls might aim to challenge the August monthly swing high, around the $30.20 zone. 

On the flip side, the $28.25 region, or the 23.6% Fibo. level is likely to protect the immediate downside ahead of the $28.00 mark. A convincing break below could make the XAG/USD vulnerable to weaken further below the $27.70-$27.65 zone, towards the next relevant support near the $27.20 region en route to the $27.00 mark. Some follow-through selling might then expose the August monthly swing low, around the $26.40-$26.35 area, before the white metal eventually drops to the $26.00 round figure.

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.