Silver Price Forecasts: XAG/USD stalls below $58.00 despite US Dollar weakness
- XAG/USD maintains a moderately bullish tone, but bulls are failing to find acceptance near the $58.00 area.
- Precious metals are drawing some support from the US Dollar's weakness on Monday.
- Market expectations that the Fed will stand pat at next week's meeting are weighing on the USD.
Silver (XAG/USD) has entered the week with a moderately bullish tone, favoured by a soft US Dollar (USD), but the precious metal remains trading within previous ranges, with bulls, so far, capped below the 0.5800 area.
The US Dollar Index (DXY), which measures the value of the Greenback against a basket of six majors, edges down less than 0.1% on Monday, with the market anticipating a pause at next week’s Federal Reserve (Fed) monetary policy meeting.
US inflation figures released last week confirmed that higher energy prices are boosting consumer prices to levels well above the central bank’s target for price stability. Fed officials, however, requested more time to assess the economic impact of September’s rate hike, and Chair Kevin Warsh refused to give any forward guidance.
Futures markets are pricing in only a 12% chance of a rate hike next week, down from nearly 60% one month ago, according to data by the CME’s FedWatch Tool. This is likely to pose a heavy weight for US Dollar rallies.
Technical Analysis: Bulls face a cluster of resistances above 0.5800
XAG/USD holds gains at $57.74 at the time of writing, after bouncing from three-month lows sub-$56.00. Momentum indicators in the four-hour chart, however, show a neutral stance, with the Relative Strength Index (14) still below the key 50 level and the Moving Average Convergence Divergence (MACD) marginally positive at 0.18, which suggests that the pair would need additional support to break overhead resistance.
Friday's high, at the $58.00 area, is keeping upside attempts limited so far, while the October 8 low, at $58.50, and the descending trendline from mid-September highs, now at $59.05, are likely to pose additional challenges for bulls. A clear break above those levels would confirm a trend shift and set the focus on the October 13 high, net $60,70.
Downside attempts, on the contrary, are likely to find support at the session lows near $56.80, ahead of last week's lows around 55.40.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.