Silver price (XAG/USD) jumps to near $49.95 during the early European session on Friday. The white metal attracts some buyers amid the ongoing US government shutdown, uncertainty and the prospect of a US interest rate cut.
“Gold and silver may need to consolidate further, but the primary drivers of the rally, reserve diversification and large, growing global sovereign debt, remain entirely valid and keep the bullish outlook intact,” said Tai Wong, an independent metals trader.
Technically, the constructive outlook of Silver remains in place as the white metal is well-supported above the key 100-day Exponential Moving Average (EMA) on the daily chart. Nonetheless, the 14-day Relative Strength Index (RSI) stands above the midline near 79.75, indicating the overbought RSI condition. This suggests that further consolidation or a temporary sell-off cannot be ruled out before positioning for any near-term silver uptick.
The key upside barrier emerges in the $50.90-$51.00 zone, representing the upper boundary of the Bollinger Band and a psychological level. A decisive break above this level could pick up more momentum and aim for the all-time high of $51.24. Further north, the next resistance level is seen at $52.00, a round figure.
In the bearish case, the low of October 8 at $47.74 acts as an initial support level for the white metal. A breach of this level could drag the Silver toward $45.91, the low of October 2. The additional downside filter to watch is $43.78, the low of September 25.
Silver (XAG/USD) daily chart
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.