Silver price (XAG/USD) claws back its early losses and turns slightly positive to near $50.30 during the European trading session on Tuesday. The white metal attracts bids as investors turn cautious ahead of the United States (US) Nonfarm Payrolls (NFP) data for September, which will be releasing on Thursday.
Investors await the US NFP data to get fresh cues on the current status of the labor market. Financial market participants lack information regarding the job market status as major economic releases were halted in last almost seven weeks due to federal shutdown.
Meanwhile, the market sentiment remains risk-averse amid receding speculation favoring further interest rate cuts by the Federal Reserve (Fed) this year. At the press time, S&P 500 futures trade 0.25% lower, exhibiting a risk-off mood.
According to the CME FedWatch tool, the probability of the Fed to cut interest rates by 25 basis points (bps) to 3.50%-3.75% in the December meeting has diminished to 43% from 62.4% seen a week ago.
Technically, the scenario of easing Fed dovish bets is unfavourable for the Silver price, given that a pause in the Fed’s monetary easing campaign bodes poorly for non-yielding assets.
Silver technical analysis
Silver price finds cushion after correcting to near the 20-day Exponential Moving Average (EMA) around $49.70.
The 14-day Relative Strength Index (RSI) returns inside the 40.00-60.00 range, suggesting indecisiveness among investors about the near-term outlook.
Looking down, the September 23 high of $44.47 would remain a key support. On the upside, the all-time high of $54.50 might act as key barrier.
Silver 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.