- Silver extends losses as investors favor government bonds over precious metals.
- XAG/USD remains vulnerable to further losses as bearish momentum persists.
- RSI approaches oversold territory as sellers eye the psychological $50 mark.
Silver (XAG/USD) slides to fresh yearly lows on Friday after plunging 5.8% on Thursday as concerns over AI-related investments weighed on equities, but failed to spark safe-haven demand for Silver as investors favour government bonds. Some traders may also be selling precious metals to offset losses in stocks. At the time of writing, Silver trades around $53.89, on track for a second consecutive weekly decline.
The white metal is now down roughly 55% from its January peak near $121. The decline has largely been driven by rising energy costs linked to the Middle East war, which began in late February, adding to inflation pressures and prompting major central banks, particularly the Federal Reserve (Fed), to raise interest rates. Higher borrowing costs increase the opportunity cost of holding non-yielding assets such as Silver.
Next week’s Fed meeting could help determine whether Silver extends its decline or stages a recovery. The US central bank is widely expected to leave interest rates unchanged after raising them by 25 basis points (bps) in September. However, policymakers’ commitment to returning inflation to the 2% target could keep another rate hike before year-end on the table. Markets price in an 80% chance of a December increase, according to the CME FedWatch Tool.
Technical analysis
On the daily chart, XAG/USD extends its decline below the descending channel floor and remaining well under the 100-day Simple Moving Average (SMA) and the 200-day SMA, which together underline a firmly bearish near-term bias.
Momentum reinforces this tone as the Relative Strength Index (RSI) hovers near oversold at 31, while the Moving Average Convergence Divergence (MACD) indicator stays below zero with a negative reading and a weakly trending backdrop highlighted by the Average Directional Index at 30.
On the topside, initial resistance appears at $55, closely followed by the broken channel lower boundary near $56.50, before the $60 horizontal cap, with the upper edge of the bearish channel and the 100-day SMA at $62 forming a dense barrier ahead of the $67 swing high and ultimately the 200-day SMA at $71.
On the downside, meaningful support is only seen at the $50 horizontal level, leaving XAG/USD vulnerable to further declines while price holds beneath the stacked overhead resistances.
(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.
I am a macro-focused research analyst with over four years of experience covering forex and commodities market. I enjoy breaking down complex economic trends and turning them into clear, actionable insights that help traders stay ahead of the curve.