Silver Price Analysis: XAG/USD bulls retain control near two-week high, around mid-$30.00s

July 5, 2024 6:41 am

  • Silver is seen consolidating its recent gains to a two-week top touched on Wednesday.
  • The technical setup favors bullish traders and supports prospects for a further move up.
  • Dips towards the $30.00 mark might be seen as a buying opportunity and remain limited.

Silver (XAG/USD) extends its sideways consolidative price move during the Asian session on Friday and currently trades near the $30.50 area, or its highest level since June 21 touched earlier this week. Nevertheless, the white metal remains on track to register strong weekly gains as traders keenly await the release of the US Nonfarm Payrolls (NFP) report before placing fresh directional bets. 

From a technical perspective, the recent goodish rebound from levels below the $28.80-$28.70 horizontal resistance breakpoint-turned-support and the subsequent move beyond the $30.00 psychological mark favors bullish traders. Moreover, the XAG/USD is holding comfortably above the key daily moving averages – 50-day, 100-day and 200-day Simple Moving Averages (SMA). This, along with the fact that oscillators on the daily chart have just started gaining positive traction, suggests that the path of least resistance for the metal is to the upside. 

Some follow-through buying beyond the weekly top, around the $30.70 region touched on Wednesday, will reaffirm the positive bias and lift the XAG/USD beyond the $31.00 mark, towards the next relevant hurdle near the $31.50-$31.55 area. The upward trajectory could extend further and allow bulls to reclaim the $32.00 round figure before aiming to challenge the $32.50 region, or over a one-decade peak touched in May.

On the flip side, any meaningful corrective slide is more likely to attract fresh buyers near the $30.00 round figure. This should help limit the downside for the XAG/USD near the $29.75-$29.70 resistance-turned-support. The latter should act as a pivotal point, which if broken decisively might prompt some technical selling and accelerate the fall towards the $29.10-$29.00 region. Some follow-through selling below the $28.80-$28.70 key support zone will negate the constructive outlook and shift the near-term bias in favor of bearish traders.

Silver daily chart

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Silver FAQs

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.

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.

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.

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.

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