- Silver fails to extend gains beyond $38.50 and retreats to $37.60 support.
- Hopes of a US-China trade deal and of peace in Ukraine are weighing on precious metals.
- XAG/USD has broken below the ascending channel; there is scope for further depreciation.
Silver (XAG/USD) accelerated losses on Monday, weighed by a moderate rebound on the US Dollar and investors’ appetite for risk as hopes of a trade agreement between the US and China and a peace deal in Ukraine remain alive.
In the absence of key macroeconomic releases, investors remain hopeful that US and Chinese negotiators will find common ground to extend their trade truce and avoid returning to triple-digit reciprocal tariffs, which would revive concerns about international trade and global economic growth.
Meanwhile, the talks between US and Russian negotiators are feeding hopes of a peace deal in Ukraine ahead of the summit between the US and Russian presidents, Trump and Putin, in Alaska later this week.
Technical analysis: XAG/USD rejected at the $38.00 previous support
From a technical perspective, Silver’s impulsive reversal from the $38.50 resistance area has broken the bottom of the ascending channel, highlighting that the bullish cycle from August 1 lows has reached its top.
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The pair has found support at the 38.2% Fibonacci retracement of the mentioned rally, which meets the August 6 low, at $37.60. The lack of acceptance beyond previous support at $38.00 suggests that further depreciation is on the cards.
The next targets are the August 5 low and the 50% Fibonacci retracement level, near $37.30, ahead of Friday’s low of $36.21 and the 61.8% Fibonacci retracement, a common target for corrective reactions, at $36.05.
T the upside, the pair would need to breach the previously mentioned intra-day high, at $38.00 (August 7,8 lows) to ease bearish pressure and shift the focus towards the $38.40-38.50, which capped tha pair on August 7 and 8.
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.
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