Silver Price Forecast: XAG/USD seems vulnerable near $30.00, ascending channel breakdown in play
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Haresh Menghani
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28 Jan @ 02:57 (GMT+0)

Silver Price Forecast: XAG/USD seems vulnerable near $30.00, ascending channel breakdown in play

  • Silver trades with a negative bias above a nearly two-week low touched on Monday.
  • The technical setup favors bearish trades and supports prospects for deeper losses.
  • A sustained move beyond the 100-day SMA is needed to negate the negative bias.

Silver (XAG/USD) struggles to capitalize on the previous day's bounce from the $29.70 area, or a nearly two-week low and ticks lower during the Asian session on Tuesday. The white metal currently trades just above the $30.00 psychological mark, down 0.20% for the day and seems vulnerable to slide further. 

Last week's failure near the 100-day Simple Moving Average (SMA) and a subsequent breakdown below a short-term ascending trend-channel favor bearish traders. Meanwhile, oscillators on the daily chart – though have been losing traction – are yet to confirm a negative outlook. This, in turn, makes it prudent to wait for some follow-through selling below the overnight swing low, around the $29.70 zone before positioning for deeper losses. 

The XAG/USD might then weaken further below mid-$29.00s and test the next relevant support near the $29.10-$29.00 area. The downward trajectory could extend further towards the $28.75-$28.70 region, or a multi-month low touched in December, before the white metal slides further towards the $28.00 round-figure mark. 

On the flip side, the ascending channel breakpoint, around the $30.30 area, now seems to act as an immediate hurdle ahead of the $30.50-$30.60 region. Any further move up might continue to face stiff resistance and remain capped near the $31.00 mark, or the 100-day SMA. The latter should act as a key pivotal point, which if cleared decisively might shift the near-term bias in favor of bullish traders and pave the way for a further appreciating move.

Silver daily chart

fxsoriginal

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.