Silver (XAG/USD) appreciates for the second consecutive day on Thursday, reaching session highs above $48.70, supported by a slight pullback in the US Dollar. From a wider perspective, however, the pair remains contained within a horizontal channel, below key resistance at the $49.35 area.
A somewhat brighter market mood has undermined support for the safe-haven US Dollar, providing a mild boost to precious metals. Nevertheless, upside attempts are likely to remain limited, as the strong US data seen on Wednesday cast further doubts on a December rate cut by the Federal Reserve, which is likely to keep the Greenback supported.
Technical analysis: Consolidating losses below $49.35
The technical picture shows Silver crawling through the last two weeks’ trading range., Oscillators show a somewhat stronger momentum, but the immediate upside bias remains frail so far, with the $49.35 area, where bulls were capped in October 23 and 31 highs, likely to pose significant resistance.
A confirmation beyond that level would give bulls fresh hopes to test the previous support in the area of $50.40-$50.60 (October 13, 17 lows). Further up the target would be the October 20 high, near $59.80.
A bearish reversal, on the contrary, would be tested at Tuesday’s low near $47.00, ahead of the $45.55 area (October 28 low). A clear break of this level would resume the broader bearish trend from four-year highs, near $55.00 hit in mid-October, and target the September 24 low, near $43.70.
This story was corrected on November 6 at 08:41 GMT to include XAG/USD in the title and not XAU/USD and to say that Silver advances to $48.70 and not to $58.70, as it was previously reported.)
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.