Silver Price Forecast: Momentum cools as XAG/USD consolidates above 50-day SMA
- Silver holds above the 50-day SMA, but fading momentum points to a possible consolidation phase.
- The 100-day SMA stands as the next major hurdle for buyers.
- A drop below the 50-day SMA would bring the $60 psychological mark into focus.
Silver trades modestly lower on Thursday, holding within Monday’s trading range as buyers take a breather following the strong rally seen at the start of the month. The metal largely shrugs off the latest US inflation data, which has reduced the chances of an imminent Federal Reserve (Fed) rate hike. At the time of writing, XAG/USD trades around $64.00, down 0.80% on the day.
While fading Fed rate-hike expectations would normally support the non-yielding metal, traders appear reluctant to chase Silver higher. The July inflation readings are seen as delaying the next rate increase rather than taking it off the table, as the inflation outlook remains uncertain and energy-driven price pressures could pick up again with the Strait of Hormuz still closed. This keeps the US Dollar (USD) supported near the upper end of its recent range, adding to the headwinds for Silver.
Technical analysis
XAG/USD holds above the 50-day Simple Moving Average (SMA) at $61.42 after rebounding strongly from the mid-$50s. Momentum indicators suggest that Silver could enter a period of consolidation before its next directional move.
The Relative Strength Index (RSI) has eased to 58 after climbing above 60 earlier this week, while the Moving Average Convergence Divergence (MACD) remains in positive territory but its green histogram bars are fading. The Average Directional Index (ADX) at 27 suggests the uptrend is still developing but lacks strong conviction.
On the topside, initial resistance is located at the 100-day SMA at $68.80, followed by the 200-day SMA at $71.56. On the downside, the 50-day SMA at $61.42 offers immediate support, followed by the $60.00 psychological mark. A deeper pullback could expose the $55.00 horizontal support area.
(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.
