Silver Price Forecast: XAG/USD drops over 1%, bears need to wait for weakness below $33.00

• Silver kicks off the new week on a weaker note, albeit manages to hold above the $33.00 mark.
• The technical setup warrants caution for bears and before positioning for any further losses.
• A sustained break below the $33.00 mark should pave the way for some meaningful correction.

Silver (XAG/USD) attracts fresh sellers during the Asian session on Monday and currently trades around the $33.30 area, down nearly 1.25% for the day. The white metal, however, manages to hold above a one-week low, around the $33.10-$33.00 area, set on Friday, warranting some caution for bearish traders.

Moreover, technical indicators on the daily chart – though have been losing positive traction – are holding in positive territory. This further makes it prudent to wait for a convincing break below the $33.00 mark before positioning for an extension of last week's pullback from the highest level since October 2012. Some follow-through selling below the $32.75-$32.65 resistance-turned-support will reaffirm the negative bias and make the XAG/USD vulnerable. 

The subsequent downfall might expose the $32.20-$32.15 intermediate support before the white metal drops to the $32.00 round figure and the $31.70-$31.65 region. The downward trajectory could extend further and drag the XAG/USD towards the $31.00 mark en route to the $30.50 area and the monthly swing low, close to the $30.00 psychological mark tested on October 8.

On the flip side, the $33.65 horizontal zone now seems to have emerged as an immediate hurdle, above which the XAG/USD is likely to reclaim the $34.00 mark and climb further towards the $34.30-$34.35 supply zone. The momentum could extend further and allow bulls to make a fresh attempt to conquer the $35.00 psychological mark before aiming to challenge the October 2012 swing high, around the $35.35-$35.40 region.

Silver 4-hour chart

Silver FAQs

Why do people invest in Silver?

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.

Which factors influence Silver prices?

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.

How does industrial demand affect Silver 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.

How do Silver prices react to Gold’s moves?

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.

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