Silver Forecast: XAG/USD rebound capped as bearish bias holds

Silver (XAG/USD) finds some support near the $63.00 mark and stages a modest intraday recovery from an over three-week low, touched earlier this Friday. The white metal retakes the $64.00 round figure during the early European session, though the upside potential seems limited as traders keenly await the release of the US consumer inflation figures.

From a technical perspective, XAG/USD keeps a bearish near-term tone following the overnight breakdown below the 200-period Simple Moving Average (SMA) on the 4-hour chart, around $64.71. The subsequent fall, however, stalls near the 38.2% Fibonacci retracement level of the July-August upswing, around the $63.00 mark, which should now act as a key pivotal point.

Meanwhile, the Relative Strength Index (RSI) at 37.46 and a negative Moving Average Convergence Divergence (MACD) reading at -0.38 on H4 hint that downside momentum is still dominant despite the recent bounce from oversold territory. This, in turn, suggests that any subsequent move up could be seen as a selling opportunity and runs the risk of fizzling out rather quickly.

In the meantime, initial resistance appears at the 200-period SMA around $64.71, followed by the 38.2% retracement at $64.91 and then the 23.6% retracement near $67.27. On the downside, immediate support is located at the 50.0% retracement at $62.99, ahead of the deeper 61.8% level at $61.08. A break there would expose the 78.6% retracement at $58.36, with the cycle low area near $54.89 as a more distant bearish objective.

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.