Silver prices attracted some bargain hunting on Tuesday, ending a three-day losing streak.
The mixed oscillator on the daily chart raises some warnings for bullish traders.
A break below the Asian session low could expose 100-day exponential moving average (EMA) support.
Silver (XAG/USD) reversed an Asian session pullback, or four-day low, in the $31.85-31.80 area and climbed to a new daily high in the last hour. The white metal is now trading in the $32.15-32.20 area, up nearly 0.20% on the day, and now appears to have ended a three-day losing streak.
However, mixed technical indicators on the daily chart raise some red flags for bullish traders and remain cautious about positioning for further appreciation. Therefore, any subsequent gains may face strong resistance and be capped near the $32.65-32.70 area. This resistance level may now become a key turning point and if decisively broken, XAG/USD will have the potential to recapture the $33.00 mark and climb further to the February monthly high around the $33.40 area.
Some follow-up buying should pave the way for further gains, targeting the next relevant resistance level, near the $33.60-33.70 area. XAG/USD may break the $34.00 round mark and extend the momentum further to the $34.50-34.55 resistance zone before challenging the multi-year high near the psychological $35.00 mark, which was touched in October 2024.
On the other hand, the Asian session lows, around the $31.85-31.80 area, may provide some support, below which XAG/USD may slide to the $31.25-31.20 area. The downward trajectory may eventually drag XAG/USD to the key support of the 100-day exponential moving average (EMA), currently located in the $31.10-31.00 area. This is followed by the lows of late February, around the $30.80 area, below which may tilt the market in favor of bearish traders.
The subsequent decline has the potential to drag XAG/USD towards the psychological $30.00 mark, passing through the $29.55-29.50 support level and below the $29.00 level, or the year-to-date low reached in January.
Silver is a precious metal that is heavily traded between investors. It has been used historically as a store of value and a medium of exchange. Although not as popular as gold, traders may turn to silver to diversify their portfolios, because of its intrinsic value, or as a potential hedge during periods of high inflation. Investors can buy physical silver in the form of coins or bars, or trade it through instruments such as exchange-traded funds (ETFs). ETFs track the price of silver in the international market.
Silver prices can be affected by a variety of factors. Geopolitical instability or fears of a deep recession could see silver prices rise due to its safe-haven status, though not as much as gold. As a non-yielding asset, silver tends to rise with lower interest rates. Its movements also depend on the performance of the U.S. dollar (USD), as assets are priced in dollars (XAG/USD). A stronger dollar tends to suppress silver price gains, while a weaker dollar can push it higher. 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, especially in areas such as electronics or solar energy, as it has one of the highest electrical conductivity of all metals, higher than copper and gold. A surge in demand can increase prices, while a drop in demand tends to reduce them. Dynamics in the U.S., Chinese, and Indian economies can also contribute to price volatility: for the U.S. and especially China, their large industrial sectors use silver in a variety of processes; in India, consumer demand for gold jewelry also plays a key role in determining gold prices.
Silver prices tend to follow the movements of gold. When gold prices rise, silver generally follows suit, as their status as safe haven assets is similar. The gold/silver ratio shows the number of ounces of silver required to equal the value of one ounce of gold and may help determine the relative valuation between the two metals. Some investors may view a high ratio as an indicator that silver is undervalued or gold is overvalued. Conversely, a low ratio may indicate that gold is undervalued relative to silver.